Why do some governments adopt unpopular reforms entailing far-reaching liberalization of the labor market, while others opt only for marginal adjustments or even regulatory reforms? This paper explains the likelihood of different types of reforms as an effect of different constellations of government partisanship and veto players. Combining the ‘blame avoidance’ and ‘veto players’ logics of politics, I argue that veto players have either a constraining or enabling effect depending on the partisan orientation of government. Liberalization is most likely to be adopted either by right parties facing few veto players, or by left parties in contexts with a high degree of power sharing. Regulatory reforms are most likely when left governments enjoy strong power concentration, but marginal regulation may also be adopted under external pressure by right governments facing many veto players. An analysis of employment protection reforms in 24 European Union countries during 1990–2007 supports the argument that the effect of political constraints and opportunities on the choice of reforms is shaped by partisan differences.

There is significant variance in the strategies of labor market flexibility under the same pressure of globalization. This article attempts to explain that variance by examining closely the Korean case, with particular attention to the response of labor, one of the most intractable actors in the reform process. After theorizing the nature of social welfare as a quasi-collective good and hypothesizing labor's responses based on Olson's theory of collective action, the study seeks to explain Korea's low commitment to flexicurity and the resultant dualism in the labor market. The core argument here is that the collective action problem among atomized corporate unions has led to high employment protection for regular workers in big business at the expense of marginal workers without appropriate social protection.