Economia Politica. Rivista di teoria e analisi Economia Politica. Rivista di teoria e analisi
Non-Technical Abstract
A major puzzle in current economic debate stems from the differences in observed rates of unemployment across developed countries. Economic analysis has generally focused on divergences in labor markets' organization (and flexibility) as the most plausible institutional explanation of this phenomenon.
In the present work, I propose a theoretical framework to address this comparative analysis, that is based on the definition of a wider micro-institutional setting. I subsequently build on an efficiency wage framework to model firms' choice on wage and effort as an "institutionally-biased" optimization. In order to do that, a stylization of different micro-institutional settings is proposed and the notion of "mode of organization" is introduced. This allows me to take into account the influence of micro-institutional parameters on firms' choices.
In a first part, I propose a theoretical framework to address a cross-country comparative analysis, that is based on the definition of a wide micro-institutional setting. The proposed stylization deals with varying micro-institutional settings across developed countries (namely France, Germany, Japan, and the US) and encompasses: i) the nature of workers' competence, ii) the structure of the firm and ii) the nature of labor markets.
As far as training and competence are concerned, I will take up the traditional distinction between general and specific training, focusing on the relationship between nature of training and workers' external mobility in the above mentioned countries.
Concerning the structure of the firm, I propose the notion of "mode of organization" (MoO) as a complex system of rules that should provide the firm with an answer to the following questions: a) controlling work intensity and effort, and b) managing information and communication flows.
Building on existing typologies of vocational training systems and the mode of organization, I eventuallly determine the nature of each micro-institutional setting by its position along two axes: the "nature of competence axis" (from firm-specific to generic competence), and the "mode of organization axis" (from centralized to decentralized MoO).
In a second part of the paper, I propose an efficiency wage model formalizing firms' choice of employment and wages given the institutional constraints. In particular, I explore how the institutional features presented above influence the choice made by firms about their incentive scheme and eventually affect the equilibrium unemployment rate.
Following an approach proposed by the radical American economists (Bowles, 1985), a job opportunity/wage equilibrium configuration is derived first, through the definition of an optimal incentive scheme for the firm. Contrary to other models, in this framework workers' effort and ability to coordinate are both determined by the nature and efficiency of the implemented incentive scheme; and the nature of this incentive scheme is conditioned by firms' organizational structure.
Results at this stage show that a wage curve as well as an opportunity curve exist corresponding to each of the micro-institutional settings that have been singled out.
In order to determine the equilibrium rate of unemployment, I subsequently consider a complementary relationship ensuring the equilibrium on the labor market. Final equilibrium, including the unemployment and vacancy rates, is then obtained by imposing the equality of in- and out-flows from the unemployment pool. This is done through an endogenous determination of both the separation and job finding rates.
Results concerning the equilibrium unemployment/vacancy configurations are derived in the paper. A tentative ranking of different micro-institutional settings (and corresponding institutional models) as regards their sustainable employment performance is then possible. This points to a major role played by the mode of organization of firms and the nature of workers' competence as key-determinants of cross-country differences in the equilibrium rate of unemployment.
The rationale of this results relies on the role of micro-institutional parameters (characterizing the nature of competence and the mode of organization) in influencing the equilibrium wage and opportunity curves. A lower value of the monitoring coefficient (as it is in decentralized firms) reduces the scope for the effort enhancing mechanism relying on external discipline (i.e., linked to the threat of being fired), thus allowing a higher opportunity rate to be compatible with wage moderation. Moreover, I show that a maximum opportunity rate exists, which is a decreasing function of the proportion of firm-specific workers inside the economy. This results from the role played by specificity of competence as an alternative disciplinary device which replaces the external mechanism relying on the unemployment and vacancy rates.
These results throw some lights on the structural causes underlying France's high unemployment experience and on possible determinants of Japan's high employment performance. However, more work is needed to incorporate into the model a stylization of micro-institutional settings characterizing other European countries (such as Italy or Spain), which is indispensable to a better understanding of the structural determinants of unemployment throughout Europe. Moreover, an empirical evaluation of the actual strength of provided results is also necessary.
DONATELLA GATTI is "dottore di ricerca" in economics at the Università degli Studi di Pavia, and researcher at the WZB (Wissenschaftszentrum Berlin), Reichpietschufer 50, 10785 Berlin, Germany
dgatti@medea.wz-berlin.de
Go back to the Home Page 
Go back to the Index
Redazione: econpol@spbo.unibo.it
Webmaster: lrossi@spbo.unibo.it