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Grupo de Estudos Monetários e Financeiros

Estudos do GEMF, N.º 02 de 2006


Does the Quality of Industrial Relations Matter for the Macro Economy?

A Cross-Country Analysis Using Strikes Data

John T. Addison
University of South Carolina (U.S.A.), GEMF/Universidade de Coimbra (Portugal), and IZA (Germany)

Paulino Teixeira
GEMF/Faculdade de Economia, Universidade de Coimbra

Using international data, we investigate whether the quality of industrial relations matters for the macro economy. We measure industrial relations inversely by strikes – which proxy we cross-check with an industrial relations reputation indicator – and our macro performance outcome is the unemployment rate. Independent of the role of other institutions, good industrial relations do seem to matter: greater strike volume is associated with higher unemployment. Holding country effects constant, however, the sign of the variable is reversed. This fixed-effects result likely picks up a direct effect of strikes, namely, their tendency to rise when striking becomes more attractive to the union.

JEL Classification: E24, J52, J53, J64, J65.

Keywords: strike rate/volume; quality of labor relations; labor market institutions; unemployment.

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