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Employment, Macroeconomic Fluctuations and Job Security

Author

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  • Díaz-Vázquez, María del Pilar
  • Snower, Dennis J.

Abstract

The paper explores the influence of job security provisions on employment and unemployment. We show that this influence depends on the persistence of the macroeconomic fluctuations to which the labour market is exposed, and on employees’ bargaining power in wage negotiations. Specifically, costs of firing and hiring reduce employment and stimulate unemployment when the macroeconomic fluctuations are sufficiently prolonged and employees have sufficient bargaining power; but firing and hiring costs can have the opposite effect if the fluctuations are transient and employees are weak. In this way, the paper offers an explanation for Europe’s favourable unemployment performance vis-à-vis the United States in the 1950s and 1960s (when macroeconomic fluctuations were transient and union strength was moderate), and Europe’s relatively unfavourable unemployment performance since the mid-1970s (when fluctuations were prolonged and unions were stronger).

Suggested Citation

  • Díaz-Vázquez, María del Pilar & Snower, Dennis J., 1996. "Employment, Macroeconomic Fluctuations and Job Security," CEPR Discussion Papers 1430, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:1430
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    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
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    Cited by:

    1. Chen, Yu-Fu & Snower, Dennis & Zoega, Gylfi, 1999. "Firing Costs: Eurosclerosis or Eurosuccesses?," Discussion Paper Series 26177, Hamburg Institute of International Economics.
    2. Yu‐Fu Chen & Dennis Snower & Gylfi Zoega, 2003. "Labour‐market Institutions and Macroeconomic Shocks," LABOUR, CEIS, vol. 17(2), pages 247-270, June.
    3. Diaz-Vazquez, Pilar & Snower, Dennis J., 2003. "On-the-Job Training, Firing Costs and Employment," IZA Discussion Papers 910, Institute of Labor Economics (IZA).
    4. repec:dun:dpaper:94 is not listed on IDEAS
    5. Bruno Amable & Lilas Demmou & Donatella Gatti, 2006. "Institutions, unemployment and inactivity in the OECD countries," Working Papers halshs-00590495, HAL.
    6. Karanassou, Marika & Sala, Hector & Snower, Dennis, 2003. "Unemployment in the European Union: a dynamic reappraisal," Economic Modelling, Elsevier, vol. 20(2), pages 237-273, March.
    7. Bruno Amable & Lilas Demmou & Donatella Gatti, 2011. "The effect of employment protection and product market regulation on labour market performance: substitution or complementarity?," Applied Economics, Taylor & Francis Journals, vol. 43(4), pages 449-464.
    8. Bruno Amable & Lilas Demmou & Donatella Gatti, 2007. "Employment Performance and Institutions: New Answers to an Old Question," CEPN Working Papers hal-04021096, HAL.
    9. Strand, Jon, 2002. "Wage bargaining and turnover costs with heterogenous labor and perfect history screening," European Economic Review, Elsevier, vol. 46(7), pages 1209-1227, July.
    10. E. Galdon-Sanchez, Jose & Guell, Maia, 2003. "Dismissal conflicts and unemployment," European Economic Review, Elsevier, vol. 47(2), pages 323-335, April.
    11. Amable, Bruno & Gatti, Donatella, 2001. "The Impact of Product Market Competition on Employment and Wages," IZA Discussion Papers 276, Institute of Labor Economics (IZA).

    More about this item

    Keywords

    Employment; Firing and Hiring Costs; Job Security; Macroeconomic Fluctuations; Unemployment; Wage Determination;
    All these keywords.

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers

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