State Intervention in Industrial Relations during Crisis

Abstract

This paper explores the causes of social pact negotiation in the European Union. Social pacts have declined in use since the 2008 economic crisis despite how ubiquitous they had been in the previous two decades. Using Maximum-Likelihood Estimation, I show that supranational politics and domestic economic conditions best explain when a government negotiates a pact with the social partners. Domestic political factors like partisan control of government and party systems fail to predict pact negotiations. Notably, unemployment, which is often thought to be a major driver of social pacts, is not found to be a factor. Governments are much more likely to negotiate a pact when growth is low or when inflation is high. The results also confirm that IMF
conditionality played no significant role in the decline of social pact negotiation. However, Eurozone members were significantly less likely to sign social pacts than other European countries.

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