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Generality, State Neutrality and Unemployment in the OECD
School of Economics, Sogang University, Seoul, Korea.
The RATIO Institute, Sweden.
Södertörn University, School of Social Sciences, Business Studies. Södertörn University, School of Social Sciences, ENTER forum.
2013 (English)In: Global Economy Journal, ISSN 1524-5861, Vol. 13, no 3, 333-358 p.Article in journal (Refereed) Published
Abstract [en]

According to Buchanan and Congleton (1998. Politics by Principle, Not Interest: Towards Nondiscriminatory Democracy. Cambridge: Cambridge University Press), the generality principle in politics blocks special interests. Consequently, the generality principle should thereby promote economic efficiency. This study tests this hypothesis on wage formation and labor markets, by investigating whether generality defined as state neutrality could explain employment performance among OECD countries during 1970–2003. We identify three types of non-neutrality concerning unemployment. These include the level or degree of government interference in the wage bargaining process over and above legislation which facilitates mutually beneficial wage agreements, the constrained bargaining range (meaning the extent to which the state favors or blocks certain outcomes of the bargaining process), and the cost shifting (which relates to state interference shifting the direct or indirect burden of costs facing the parties on the labor market). Our overall hypothesis is that non-neutrality or non-generality increases unemployment rates. The empirical results from the general conditional model suggest that government intervention and a constrained bargaining range clearly increase unemployment, while a few of the cost shifting variables have unexpected effects. The findings thus give some, but definitely not unreserved, support for the generality principle as a method to promote economic efficiency. One implication may be that the principle should be amended by other requirements if the political process shall indeed be able to promote economic efficiency.

Place, publisher, year, edition, pages
De Gruyter , 2013. Vol. 13, no 3, 333-358 p.
Keyword [en]
generality; state neutrality; efficiency; unemployment; wage bargaining; cost shifting; OECD
National Category
Economics and Business
Research subject
Politics, Economy and the Organization of Society
URN: urn:nbn:se:sh:diva-21073DOI: 10.1515/gej-2013-0017ScopusID: 2-s2.0-84894535788OAI: diva2:684567
Available from: 2014-01-08 Created: 2014-01-08 Last updated: 2016-10-03Bibliographically approved

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