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Institutions, Innovation and Growth

Selected Economic Papers

Edited by Jean-Philippe Touffut

The first book in this important new series, under the general editorship of Nobel Laureate Robert Solow, Institutions, Innovation and Growth assembles a stellar cast of international contributors. Leading economists join the debate on innovation and economic growth, focussing on a broad spectrum of issues ranging from labour markets to corporate governance. Growth paths within the OECD are also assessed, with particular emphasis on contrasts between US and European models. The book seeks to identify those institutional factors, taking into account different national trajectories, which might serve to promote economic growth in Europe.
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Chapter 2: Adapting European labout institutions to global economic and technical change

David Marsden


2. Adapting European labour institutions to global economic and technical change David Marsden INTRODUCTION Although most of the labour institutions that characterize the labour markets of European countries have a long history, their present form has been profoundly shaped by the postwar ‘historic compromise’ and the subsequent years of economic prosperity. That period consolidated the pre-eminence of the open-ended employment relationship as the leading contractual form adopted by firms and workers, and it became the guiding assumption for labour protection and social insurance. It became the norm not just in the statistical sense, but also in the sense that it was the desirable state of affairs. The open-ended, indefinite duration, employment relationship has come under pressure in recent years, not least because of the rise of the ‘new economy’. As a result of new communications’ technologies, firms are able to adopt radically different methods of internal management and coordination between businesses. The management literature is now full of articles about networked organizations with flatter structures and more permeable boundaries (for example, Arthur and Rousseau, 1996). The globalization of businesses and of markets, as a result of both technical change and political decisions such as the Single European Market, have increased competition and the speed with which firms are challenged in established activities. As a result, they find that they need to be more flexible, not just with respect to the size of their workforces, but also regarding the mix of activities in which they engage. Should they ‘make’ or ‘buy’...

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