Dynamic Labor Markets: Organizing Labor Markets to Boost Job Opportunities and Social Welfare

Policy Paper No. 62

Economic growth largely comes about through a process of extensive churning and restructuring, most of which is a shift from less to more successful firms within narrowly defined industries. In order to increase aggregate employment by, say, two per cent in a year, it may be necessary to create 7 to 10 times as many jobs, and worker flows need to be substantially larger still. Capitalism can be seen as a process of creative destruction where novel ideas continuously challenge old structures, thereby giving rise to structural transformation when new successful innovations, products, firms and industries arise while obsolete ones decline and exit. Empirical studies point out high-growth firms to be the main drivers of this process.

Research shows that high-growth firms can grow more in line with their inherent potential if labor markets are less regulated. 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.

Magnus Henrekson


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Sick of Inequality?

An Introduction to the Relationship between Inequality and Health

Sick of Inequality.jpg

In this book Andreas Bergh, Therese Nilsson, IFN and Lund University, and Daniel Waldenström, IFN and Paris School of Economics, France, review the latest research on the relationship between inequality and health. What does inequality mean for our health? Does increasing income inequality affect outcomes such as obesity, life expectancy and subjective well-being?


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