Structural reforms in Europe and the (in)coherence of institutions

Abstract: The aim of this paper is to analyse the consequences of some structural reforms on the institutional coherence of OECD countries, particularly in Continental Europe, and on their economic performance, particularly as regards employment. Because institutions in developed political economies are interrelated through a complex network of complementarities, institutional change has consequences beyond the area concerned in a reform. This also implies that there are complementarity effects in reforms themselves. A challenge of reform programmes is therefore to achieve a new type of complementarity between reformed institutions. The paper presents empirical evidence questioning the compatibility of the ongoing structural reforms in product and labour markets with the existing institutional structures in some OECD countries. The coherence of the flexicurity strategy, i.e. a combination of labour-market flexibility and a generous welfare state, is also questioned, from the point of view of both economic efficiency and political economy.