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be identified as the basic features of IR system in CMEs and LMEs. In CMEs it is formal institutions that play a much central role in governing the economy and regulating the labour relations, wage determination is at industry level which happens through collective bargaining and unions play an important role in this and thus employees have a strong role in making decisions that are relevant to labour force, strong education and training system are present which encourages vocational training, technological transfers take place through inter company relationships and there is patient capital system to retain skilled labour force even through economic downturns. In CMEs there are substantial rules like right of participation, employment rights, unfair dismissal, redundancy arrangements, health and safety regulations etc that governs the employment relationships. Sometimes it is argued that these rules prevent CMEs from adjusting their labour supply and makes it inefficient in allocating factors of production. Financial systems in CMEs allow long term financing to the companies. The role of the state in the CMEs is to cooperate with the companies to establish a good framework in which each of the companies can operate effectively and the institutional framework in CMEs also encourage long term cooperation among the companies. Thus these features make CMEs a high-skill, high-wage and high-productivity approach where employers compete on quality and not cost. CMEs include northern European countries like Germany, Sweden, Norway, Denmark, Finland, Austria Etc. On the other hand LMEs are typical Anglo Saxon economies of US, UK, Canada, Australia, New Zealand etc. In this case the features of IR system is coordination occurs through market mechanisms, wages are set by market forces where union and employee participation is excluded progressively, employee representations are discouraged, education and training systems emphasis on only general education rather than vocational training, inter company systems impose strong competition that limits the co operation between them. In LMEs the state plays very less role and therefore the companies have a weak capacity to organise their activities collectively to negotiate their framework with the state. Financial systems in LMEs are characterised in a way that it imposes short term finances and also allows high risk taking. Traditional literature states that the end result of LMEs is lack of skills in the market and this will drive them to low-wage, low-skill and low-productivity approach to attain competitiveness.

Factor 1: Economic performance in LMEs and CMEs- Over the past years there is a central question in the literature which is concerned about whether LMEs are economically efficient or the CMEs. In testing the economic efficiency of a country we consider the basic determinants of economic efficiency like inflation, unemployment rate, productivity and social equity. The agreements negotiated in CMEs are extensive in scope and includes broad economic and social goals. The institutional arrangement in CMEs to negotiate agreements is know as corporatism. The agreements are thus associated with extensive welfare system, higher levels of social and employment benefits, lower levels of inequality and lower levels of wage dispersion. Thus the CMEs attain social equity and overcome the outcomes of LMEs in terms of unequal wealth and education. Adding to these inequalities in income is b