Dissertation
The Political Economy of Labor Market Institutions
Upon graduating from college, I went to Seoul, Korea as a Fulbright Scholar in the fall of 1997 as the financial crisis was sweeping through East Asia. My studies and work as a financial analyst at a major investment bank in the aftermath of the crisis motivated me toward further research on the relationship between globalization, economic reform, and social policy, ultimately leading to my dissertation, The Political Economy of Labor Market Institutions. It examines a number of central issues in comparative political economy. In a globalizing and turbulent economic environment, how do governments protect their working citizens from the vicissitudes of the market? What type of policy outputs do domestic actors demand and when do they get what they want? I combine cross-national quantitative studies with comparative and country-specific analysis focused on East Asia to answer these questions.
Labor market institutions—job security regulations, minimum wages, unemployment benefits, and the like—vary from country to country. Some nations focus on providing workers with job security through what is commonly known as employment protection legislations (EPL). Others develop institutions that provide government assistance to workers when they lose their jobs, of which the most common form is unemployment insurance systems (UIS). Some have both and many have neither, and the particular combination or focus of policies varies across time and space.
My argument is that the choice of labor market institutions results from a political bargain between business and labor, a bargain that is conditioned not only by labor power, but also by the existing set of labor market institutions. In other words, the preferences of labor and business are shaped by the policy status quo. Where there is little employment protection, an increase in labor power prompts workers to bargain for more protection, raising the likelihood that there will be more employment protection. Where workers already enjoy substantial employment protection, however, a decline in labor power encourages employers to demand labor market flexibility. To overcome labor opposition, employers compensate them by offering unemployment insurance, reversing their traditional opposition to social policy commitments. Under this scenario, countries that adopt UIS are more likely to reduce EPL since they are better able to gain labor’s support on market liberalization. This bargain, however, forces both employers and labor to settle for their second-best policy choice.
In order to assess these arguments, I have developed a panel dataset on labor market institutions in 84 countries. Modeling first differences, I investigate the impact of the policy status quo and UIS adoption on changes in employment protections (Chapter 3). I also employ qualitative analysis on a subset of East Asian economies (Chapter 4) and a detailed case study on Korea (Chapter 5) to further test the plausibility of my arguments. The East Asian chapter compares Korea, Indonesia, Malaysia, and Thailand, the four countries hardest hit by the East Asian financial crisis of 1997-98. An in-depth look into the Korean case further clarifies the causal mechanisms at work.
* Chapter drafts are available by request.
Jinhee Lee Choung