There is substantial evidence from industry-level studies on regulation as well from firm-level studies on the dynamics of firm performance that confirm the need for such a conducive environment to generate productivity growth.17 Douglas North defined institutions as … the rules of the game in a society … the humanly devised constraints that shape human interaction.18 And being “humanly devised constraints” (rather than exogenous geographical or climactic constraints), their major impact was through the setting of incentives.19 And one can see the remaining challenges for many advanced economies as follows:   Employment regulation needs to help more proactively outsiders, low-skilled, young and older workers.
For example, in the wake of risk transfer from relatively wealthy households to those less well-off, consumption and saving levels might  BIS Review 34/2005  3  become more volatile.