Labour market protection across space and time: A revised typology and a taxonomy of countries’ trajectories of change

Abstract

We measure and interpret the evolution of labour market protection across 21 high-income countries over three decades, employing as conceptual foundations the ‘regime varieties’ and ‘trajectories of change’ developed by Esping-Andersen, Estevez-Abe, Hall and Soskice, and Thelen. We measure labour market protection considering four institutional dimensions – employment protection, unemployment protection, income maintenance and activation – and the evolution of the workforce composition. This measurement accounts for the joint evolution of labour market institutions, their complementarities and their relation to outcomes, and mitigate the unrealistic Average Production Worker assumption. We handle the multi-dimensional nature of labour market protection with Principal Component Analysis and capture the characteristics of countries’ trajectories of change with a composite score. We contribute to the literature in three ways. (1) We portray a revised typology that accounts for processes of change between 1990 and 2015, and that clusters regime varieties on the basis of coordination and solidarity levels, that is, Central/Northern European, Southern European, liberal. (2) We illustrate that, despite a persistent gap, a large majority of Coordinated Market Economies experiencing a decline in the level of labour market protection became more similar to Liberal Market Economies. (3) We develop a fivefold taxonomy of countries’ trajectories of change (liberalization, dualization, flexibility, de-dualization and higher protection), showing that these trajectories are not always path-dependent and consistent with regime varieties previously developed in the literature.