Explanations of economic performance have focused on purely economic variables or the impact of political parties. Researchers have rarely used labor market or firm institutions as explanations of unemployment, and in the few instances when they do, the analyses are cross-sectional and subject to the critique that the analyses do not capture the highly cyclical nature of unemployment. This chapter provides an approach to measuring institutions in a time-series format, and then puts institutions in 18 countries into a pooled “time-series and cross-sectional” analysis. Both private and public capital formation are controlled since these are important economic variables often used to explain economic growth and unemployment. Although capital formation has important effect, the results show that both labor market institutions and codetermination have independent and significant effects on unemployment. These results show how institutional theories can be advanced if institutional variables are measured in a more precise way over time, rather than being accepted as constants simply linked to political culture.