The development of the unemployment rate differs substantially between OECD countries. In recent years some countries have experienced a mild increase, other countries have had a stable unemployment rate, while there are also ‘successful’ countries in which the unemployment rate has decreased a lot. A common feature of the successful countries is that they implemented a comprehensive set of institutional reforms. In this Paper we present a theoretical and empirical framework to investigate how unemployment is affected by different labour market institutions (LMI) such as labour taxes, unemployment benefits, employment protection, union bargaining power and (de)centralization of bargaining. We argue that complementarities between LMI can be exploited to improve labour market performance. In our empirical analysis of annual data over the period 1960–95 of 18 OECD countries we show that interactions between LMI are indeed important.
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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number
2492.
Find related papers by JEL classification: E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution J68 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Public Policy
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Baltagi, Badi H & Griffin, James M, 1984.
"Short and Long Run Effects in Pooled Models,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 25(3), pages 631-45, October.
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