Efficiency of the Czech Labour Market: Do Institutions Matter?

Abstract

The efficient functioning of the labour market is an important factor that affects long-term economic growth. The interaction of supply and demand on the labour market is influenced by institutions which change the motivations and behaviour of economic actors and, ultimately, the flexibility of the labour market. There is no consensus in the literature on the effect these institutions have on labour market outcomes. This chapter focuses on a set of selective labour market institutions (employment protection legislation, minimum wages, unemployment benefits, labour taxation, trade unions and active labour market policies), compares their relevance to other European Union (EU) countries and through the lens of the Beveridge curve it tries to evaluate their impact on effectiveness of the Czech labour market. The international comparison shows that most of the considered institutions/regulations do not reach such importance (except employment protection legislation) and that they have a significant negative effect on labour market outcomes. Even the model of the Beveridge curve does not indicate that the Czech labour market is characterised by rigidities that would impair the effectiveness of a matching process at the aggregate level.

Citation

Franc, A. (2024), "Efficiency of the Czech Labour Market: Do Institutions Matter?", Stavárek, D. and Tvrdoň, M. (Ed.) Modeling Economic Growth in Contemporary Czechia (Entrepreneurship and Global Economic Growth), Emerald Publishing Limited, Leeds, pp. 183-198. https://doi.org/10.1108/978-1-83753-840-920241012