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From wage rigidity to labour market institution rigidity: A turning-point in explaining unemployment?

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  • Guerrazzi, Marco
  • Meccheri, Nicola

Abstract

In this paper we offer a critical discussion about the concept of labour market rigidity in the light of recent theoretical approaches that have aimed to provide sound micro-foundations to the presence of unemployment in market economies. We point out that the concept of labour market rigidity usually referred to in such theories has changed over time, involving in succession the rigidity of wages, contracts and labour market institutions. We also appraise the factors that lead labour market institutions rigidity, stressed by the search literature, to challenge the more widespread explanation of unemployment grounded on wage rigidity. Moreover, we analyse some theoretical and empirical issues that cast doubt on the ability to deal with unemployment, disentangling the role of institutional rigidities from that of wage stickiness.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics).

Volume (Year): 41 (2012)
Issue (Month): 2 ()
Pages: 189-197

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Handle: RePEc:eee:soceco:v:41:y:2012:i:2:p:189-197

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Web page: http://www.elsevier.com/locate/inca/620175

Related research

Keywords: Wages; Labour market institutions; Unemployment; Search theory;

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