ABSTRACT
Labour market regulation sets floors under wages and working conditions. This chapter discusses possible rationales for these floors: whether they are the outcome of efficiency considerations, or whether they are simply politically expedient (Saint-Paul 2000). A third alternative is that labour market regulation is the outcome of a sort of path dependence, with French legal origin countries predisposed to regulate more strictly than English common law countries (Botero et al. 2004). Within Europe, the UK’s ‘belief structure’ (North 1998: 28) has since the seventeenth century led to the evolution of freedoms. Most of the large literature on labour market regulation considers its consequences, notably for unemployment, rather than its causes. However, if regulation increases unemployment, its efficiency is automatically called into question. Hence, our enquiry into causes will be assisted by a knowledge of effects.
