How Labor Market Institutions Affect Job Creation and Productivity Growth

Economic growth necessitates extensive churning and restructuring, the bulk of which is about shifts from less to more successful firms within the same industry. Labor market institutions favoring reallocation and dynamism include portability of tenure rights, fully actuarial and portable pension plans, a full decoupling of health insurance from the current employer, decentralized and individualized wage-setting arrangements and government income insurance systems that encourage activation, mobility and risk-taking.