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Does the recent success of some OECD countries in lowering their unemployment rates lie in the clever design of their labour market reforms?

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Author Info
Belot, M.V.K.
Ours, J. C. van (Tilburg University, Center for Economic Research)

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Abstract

The development of the unemployment rate differs substantially between OECD countries. In recent years some countries experienced a mild increase, other countries had a stable unemployment rate, while there are also 'successful' countries in which the unemployment rate 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)centralisation 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 1960-1995 of eighteen OECD countries we show that interactions between LMI are indeed important.

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Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 40.

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Date of creation: 2000
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Handle: RePEc:dgr:kubcen:200040

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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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  1. Steve Nickell & Jan van Ours, 2000. "Why has Unemployment in the Netherlands and the United Kingdom Fallen so Much?," Canadian Public Policy, University of Toronto Press, vol. 26(s1), pages 201-220, July. [Downloadable!] (restricted)
  2. Junankar, P.N. & Madsen, J.B., 1996. "Unemployment in the OECD: Models and Mysteries," Discussion Paper Series In Economics And Econometrics 9648, Economics Division, School of Social Sciences, University of Southampton.
    Other versions:
  3. Bertola, Giuseppe, 1999. "Microeconomic perspectives on aggregate labor markets," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 45, pages 2985-3028 Elsevier. [Downloadable!] (restricted)
  4. Bean, Charles R, 1994. "European Unemployment: A Survey," Journal of Economic Literature, American Economic Association, vol. 32(2), pages 573-619, June. [Downloadable!] (restricted)
  5. Nickell, S. & Layard, R., 1997. "Labour Market Institutions and Economic Performance," Papers 23, Centre for Economic Performance & Institute of Economics.
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  6. David Marsden, 1995. "The Impact of Industrial Relations Practices on Employment and Unemployment," OECD Jobs Study Working Papers 3, OECD, Directorate for Employment, Labour and Social Affairs. [Downloadable!]
  7. Layard, R. & Nickell, S., . "Layard-Nickell," Instructional Stata datasets for econometrics layardnickell, Boston College Department of Economics. [Downloadable!]
  8. John P Martin, 1998. "What Works Among Active Labour Market Policies: Evidence from OECD Countries' Experiences," RBA Annual Conference Volume, in: Guy Debelle & Jeff Borland (ed.), Unemployment and the Australian Labour Market Reserve Bank of Australia. [Downloadable!]
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  9. Coe, David T & Snower, Dennis J., 1997. "Policy Complementarities: The Case for Fundamental Labour Market Reform," CEPR Discussion Papers 1585, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  10. Pesaran, M.H. & Smith, R., 1992. "Estimating Long-Run Relationships From Dynamic Heterogeneous Panels," Cambridge Working Papers in Economics 9215, Faculty of Economics, University of Cambridge.
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  11. 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. [Downloadable!] (restricted)
  12. Stephen Machin & Alan Manning, 1992. "Minimum Wages," CEP Discussion Papers dp0080, Centre for Economic Performance, LSE.
  13. Francesco Daveri & Guido Tabellini, 2000. "Unemployment, growth and taxation in industrial countries," Economic Policy, CEPR, CES, MSH, vol. 15(30), pages 47-104, 04. [Downloadable!] (restricted)
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  14. Judson, Ruth A. & Owen, Ann L., 1999. "Estimating dynamic panel data models: a guide for macroeconomists," Economics Letters, Elsevier, vol. 65(1), pages 9-15, October. [Downloadable!] (restricted)
  15. Freeman, Richard B., 1998. "War of the models: Which labour market institutions for the 21st century?1," Labour Economics, Elsevier, vol. 5(1), pages 1-24, March. [Downloadable!] (restricted)
  16. Nickell, Stephen, 1998. "Unemployment: Questions and Some Answers," Economic Journal, Royal Economic Society, vol. 108(448), pages 802-16, May. [Downloadable!] (restricted)
  17. Robert J. Flanagan, 1999. "Macroeconomic Performance and Collective Bargaining: An International Perspective," Journal of Economic Literature, American Economic Association, vol. 37(3), pages 1150-1175, September. [Downloadable!] (restricted)
  18. Nickell, Stephen, 1997. "Unemployment and Labor Market Rigidities: Europe versus North America," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 55-74, Summer. [Downloadable!] (restricted)
  19. David Marsden, 1995. "The Impact of Industrial Relations Practices on Employment and Unemployment," CEP Discussion Papers dp0240, Centre for Economic Performance, LSE. [Downloadable!]
  20. Pasaran, M.H. & Im, K.S. & Shin, Y., 1995. "Testing for Unit Roots in Heterogeneous Panels," Cambridge Working Papers in Economics 9526, Faculty of Economics, University of Cambridge.
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