National culture and labour-market flexibility

Abstract

This paper develops a cultural explanation for labour-market flexibility, building on the work of Lipset. Using Hofstede's conceptual framework for categorizing national cultures, certain hypotheses are derived concerning the association of various labour-market institutions and rigidities connected with employment, pay bargaining the treatment of the unemployed, and Hofstede's dimensions of national culture. These hypotheses are tested on data for OECD countries, using ordinary least squares regression. The results demonstrate a strong statistical association between Hofstede's cultural indices and the various labour-market rigidities. In particular, there is a strong inverse relationship between Hofstede's MAS variable and all our labour flexibility variables. Cultural values reflecting feminine gender structuring appear to be strongly associated with labour-market inflexibility. There is also a strong statistical association between scores on the UAI dimension, and employment rigidities and pay-bargain...