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How Do Institutions Affect Structural Unemployment in Times of Crises?

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  • Davide Furceri

    ()
    (International Monetary Fund, USA)

  • Annabelle Mourougane

    ()
    (Organisation for Economic Co-operation and Development, France)

Abstract

This paper examines the effect of economic crises on structural unemployment using an Autoregressive Distributed Lags model and accounting for the role of institutional settings on an unbalanced panel of 30 OECD economies from 1960 to 2006. We found that downturns have, on average, a significant positive impact on the level of structural unemployment rate. The maximum impact varies with the severity of the downturn. Institutions (such as employment protection legislation, average replacement ratio and product market regulation) influence both the extent of the initial shock and the adjustment pattern in the aftermath of an economic downturn.

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File URL: http://www.panoeconomicus.rs/casopis/2012_4/01%20Davide%20Furceri.pdf
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Bibliographic Info

Article provided by Savez ekonomista Vojvodine, Novi Sad, Serbia in its journal Panoeconomicus.

Volume (Year): 59 (2012)
Issue (Month): 4 (September)
Pages: 393-419

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Handle: RePEc:voj:journl:v:59:y:2012:i:4:p:393-419

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Web page: http://www.panoeconomicus.rs/

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Keywords: Crisis; Structural unemployment; Institutions; Employment protection legislation.;

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References

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  1. Valerie Cerra & Sweta Chaman Saxena, 2007. "Growth dynamics: the myth of economic recovery," BIS Working Papers 226, Bank for International Settlements.
  2. Bertola, Giuseppe & Blau, Francine D & Kahn, Lawrence, 2002. "Labour Market Institutions and Demographic Employment Patterns," CEPR Discussion Papers 3448, C.E.P.R. Discussion Papers.
  3. Pissarides, Christopher A., 2001. "Employment protection," Labour Economics, Elsevier, vol. 8(2), pages 131-159, May.
  4. Kugler, Adriana & Pica, Giovanni, 2003. "Effects of Employment Protection and Product Market Regulations on the Italian Labor Market," IZA Discussion Papers 948, Institute for the Study of Labor (IZA).
  5. Olivier Blanchard, 2005. "European Unemployment: The Evolution of Facts and Ideas," NBER Working Papers 11750, National Bureau of Economic Research, Inc.
  6. Andrea Bassanini & Romain Duval, 2006. "Employment Patterns in OECD Countries: Reassessing the Role of Policies and Institutions," OECD Economics Department Working Papers 486, OECD Publishing.
  7. Kugler, Adriana & Pica, Giovanni, 2003. "The effects of employment protection and product market regulations on the Italian labor market," Discussion Paper Series In Economics And Econometrics 0310, Economics Division, School of Social Sciences, University of Southampton.
  8. Giuseppe Bertola & Francine D. Blau & Lawrence M. Kahn, 2001. "Comparative Analysis of Labor Market Outcomes: Lessons for the US from International Long-Run Evidence," NBER Working Papers 8526, National Bureau of Economic Research, Inc.
  9. Romain Duval & Jørgen Elmeskov, 2005. "The Effects of EMU on Structural Reforms in Labour and Product Markets," OECD Economics Department Working Papers 438, OECD Publishing.
  10. Pierre-Olivier Beffy & Patrice Ollivaud & Pete Richardson & Franck Sédillot, 2006. "New OECD Methods for Supply-side and Medium-term Assessments: A Capital Services Approach," OECD Economics Department Working Papers 482, OECD Publishing.
  11. Pete Richardson & Laurence Boone & Claude Giorno & Mara Meacci & David Rae & David Turner, 2000. "The Concept, Policy Use and Measurement of Structural Unemployment: Estimating a Time Varying NAIRU Across 21 OECD Countries," OECD Economics Department Working Papers 250, OECD Publishing.
  12. Giuseppe Nicoletti & Stefano Scarpetta, 2005. "Product Market Reforms and Employment in OECD Countries," OECD Economics Department Working Papers 472, OECD Publishing.
  13. Romain Duval & Jørgen Elmeskov & Lukas Vogel, 2007. "Structural Policies and Economic Resilience to Shocks," OECD Economics Department Working Papers 567, OECD Publishing.
  14. Fabian Valencia & Luc Laeven, 2008. "Systemic Banking Crises," IMF Working Papers 08/224, International Monetary Fund.
  15. Annabelle Mourougane & Lukas Vogel, 2009. "Speed of Adjustment to Selected Labour Market and Tax Reforms," Comparative Economic Studies, Palgrave Macmillan, vol. 51(4), pages 500-519, December.
  16. Laurence M. Ball, 2009. "Hysteresis in Unemployment: Old and New Evidence," NBER Working Papers 14818, National Bureau of Economic Research, Inc.
  17. Davide Furceri & Annabelle Mourougane, 2009. "The Effect of Financial Crises on Potential Output: New Empirical Evidence from OECD Countries," OECD Economics Department Working Papers 699, OECD Publishing.
  18. Anita Wölfl & Isabelle Wanner & Tomasz Kozluk & Giuseppe Nicoletti, 2009. "Ten Years of Product Market Reform in OECD Countries: Insights from a Revised PMR Indicator," OECD Economics Department Working Papers 695, OECD Publishing.
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Citations

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Cited by:
  1. Romain Bouis & Romain Duval, 2011. "Raising Potential Growth After the Crisis: A Quantitative Assessment of the Potential Gains from Various Structural Reforms in the OECD Area and Beyond," OECD Economics Department Working Papers 835, OECD Publishing.
  2. Gamberoni, Elisa & von Uexkull, Erik & Weber, Sebastian, 2010. "The role of openness and labour market institutions for employment dynamics during economic crises," ILO Working Papers 461897, International Labour Organization.
  3. Annabelle Mourougane & Davide Furceri, 2010. "Une lecture de la crise à la lumière des crises passées," Économie et Statistique, Programme National Persée, vol. 438(1), pages 19-42.
  4. Horst Feldmann, 2012. "Product Market Regulation and Labor Market Performance around the World," LABOUR, CEIS, vol. 26(3), pages 369-391, 09.
  5. Bernal-Verdugo, Lorenzo E. & Furceri, Davide & Guillaume, Dominique, 2013. "Banking crises, labor reforms, and unemployment," Journal of Comparative Economics, Elsevier, vol. 41(4), pages 1202-1219.
  6. Davide Furceri & Lorenzo E. Bernal-Verdugo & Dominique M. Guillaume, 2012. "Crises, Labor Market Policy, and Unemployment," IMF Working Papers 12/65, International Monetary Fund.

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