Training and Labour Market Institutions

Institutional factors affecting the labour and the product market differ significantly in European countries. Product market competition, for instance, is recognized to be stronger in Anglo-Saxon countries, and employment protection to be higher in Southern European countries. There is extensive literature which investigates how these institutional differences affect unemployment dynamics. The bottom line of this research is that analysing the interaction between institutions and economic shocks helps explain unemployment differences across OECD countries. This chapter reviews empirical literature regarding the question of whether labour and product market institutions affect training incidence and whether they can account for some of the variation in training outcomes observed across European countries. It is argued that most of the existing evidence is not comparative but country-specific, with a strong emphasis on the US and to a lesser extent on the UK. A European perspective is taken by matching data from the European Community Household Panel - a large dataset covering 15 EU countries - with information on time varying institutions. An empirical investigation of the relationship between training incidence and labour and product market institutions is carried out, focusing on cross-country and time series variations in institutions.