Labour Market Institutions and Productivity in the New EU Member States

We examine labour market institutions in eight Central and Eastern European new EU member states and their developments from the mid-1990s until EU accession. We try to assess to what extent these developments have constituted convergence towards "European" institutional structures, and whether it is possible to assess their impact on productivity growth. We find remarkable divergence in rates of unionization and bargaining coverage and spending on active labour market policies. Levels of labour taxation have been falling in a number of new member states from the previously relatively high levels. Our examination of the previous experience of European countries suggests that this might have a positive effect on productivity growth. However, labour market institutions are not found to be significant determinants of productivity growh in a sample that includes the new member states.