Workplace Flexibility and Institutions in Europe. A Tale of Two Countries.

This paper studies the determinants of the joint adoption of employment, wage and working time flexibility in workplaces, paying attention to the existence of complementarities. To better understand the role of country-specific institutional features, we compare the adoption of flexibility in Italy and Great Britain, two EU countries characterized by quite different product and labour market regulation. Empirical analysis based on establishment-level data shows that the probability of adopting any forms of flexibility is highly influenced by both firm characteristics and institutional variables, mainly by employment protection, union power and firm-level bargaining. Country-specific patterns also emerge: in Italy employment and wage flexibility are complement and they are both substitute for time flexibility; in Great Britain the flexibility mix is less clear cut. These results suggest that both policy makers and social partners should be aware that incentives or restrictions to specific forms of flexibility are likely to produce effects also on the use of other flexible work arrangements.