Do institutions matter? Explaining the use of working time flexibility arrangements of companies across 21 European countries using a multilevel model focusing on country level determinants

This paper explores the reasons behind the differences in the use and provision of different

types of working time flexibility options of companies across European labour markets with a

special focus on the country differences. Competing theories on the cross-country variances of

labour market flexibility are tested to examine whether labour market institutions are the driving

forces of working time flexibility practices in comparison to other factors such as economic,

labour market structures and cycles. It uses a multi-level model which enables examination

of companies in the context of the country in which it is embedded, while including

both company and country level characteristics in the explanatory model. In this paper, the

issue of flexibility is addressed broadly, thus, it perceives labour market flexibility as a

method used for the needs of employees as well as for those of employers. In addition, the

“flexible firm” approach is taken and various flexibility options are considered to be bundles

of arrangements with similar latent characteristics and not as separate entities. Based on this,

the paper explains the differences between countries where there are more worker-oriented

working time flexibility options to those where flexibility practices are more companyoriented.

The data used here is the European Establishment Survey of Working-Time and

Work-life Balance (ESWT) from the European Foundation of the Improvement of Living and

Working Conditions. This survey covers over 21,000 establishments in 21 EU member states

for the years 2004/2005. The outcomes of the analyses show that indeed institutions, such as

employment protection regulations or centralization of bargaining explain the differences

across countries in their variance in working time practices In addition, the strength of unions

is associated to countries where companies use more worker friendly working time options

and less company-oriented options. Labour market situations and structure of the economy

such as deindustrialization or female labour market participation patterns also explain the

country differences in working time practices. However, for the worker-oriented flexibility it

seems that institutions are more important whereas for the company-oriented flexibility options,

economic and labour market situations are the driving source.