Institutions, Restructuring and Macroeconomic Performance.

A growing body of new research has emphasized the macroeconomic consequences of transactional impediments in factor markets, and their role in the recurrent restructuring requirements of modern economies. We first review the function institutional arrangements play in facilitating transactions and explore the macroeconomic consequences of poor institutions. As an application, we discuss the lessons that can be learnt from observed changes in the nature of unemployment in Europe. We then analyse the effect the institutional environment can have on macroeconomic restructuring. In light of this framework, we revisit the question of the relationship between recessions and restructuring activity, and review the existing evidence of reduced restructuring following recessions. We also discuss corroborating evidence from "merger waves" in the restructuring of corporate assets.