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Labor Market Institutions and Unemployment: A Critical Assessment of the Cross-Country Evidence

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Abstract

This paper provides a critical view of the cross country literature on the impact of labour market institutions and policies on the evolving pattern of unemployment in OECD countries. Such widely used indicators as the generosity of unemployment insurance or the strength of trade unions are neither strongly correlated individually with unemployment nor contribute robust and well defined impacts on unemployment within increasingly sophisticated multivariate literature. Our own tests, with a comprehensive data set covering 1960-99, show how dependent the estimated effects are to the particular indicators used and periods covered and overall suggest that a relatively minor role for the institutions and policies in accounting for unemployment patterns.
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  • Dean Baker & Andrew Glyn & David Howell & John Schmitt, 2002. "Labor Market Institutions and Unemployment: A Critical Assessment of the Cross-Country Evidence," SCEPA working paper series. 2002-17, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
    • Handle: RePEc:epa:cepawp:2002-17
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    File URL: https://www.economicpolicyresearch.org/scepa/publications/workingpapers/2002/paper168.pdf
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    1. Michèle Belot & Jan C. van Ours, 2004. "Does the recent success of some OECD countries in lowering their unemployment rates lie in the clever design of their labor market reforms?," Oxford Economic Papers, Oxford University Press, vol. 56(4), pages 621-642, October.
    2. Blanchard, Olivier & Wolfers, Justin, 2000. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," Economic Journal, Royal Economic Society, vol. 110(462), pages 1-33, March.
    3. Bertola, Giuseppe & Blau, Francine D & Kahn, Lawrence, 2001. "Comparative Analysis of Labour Market Outcomes: Lessons for the US from International Long-Run Evidence," CEPR Discussion Papers 3023, C.E.P.R. Discussion Papers.
    4. repec:hal:spmain:info:hdl:2441/5571 is not listed on IDEAS
    5. Stephen Nickell, 1997. "Unemployment and Labor Market Rigidities: Europe versus North America," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 55-74, Summer.
    6. van Ours, Jan C. & Belot, Michèle, 2000. "Does the Recent Success of some OECD Countries in Lowering their Unemployment Rates lie in the Clever Design of their Labour Ma," CEPR Discussion Papers 2492, C.E.P.R. Discussion Papers.
    7. Michael Bruno & Jeffrey D. Sachs, 1985. "Economics of Worldwide Stagflation," NBER Books, National Bureau of Economic Research, Inc, number brun85-1, March.
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    More about this item

    Keywords

    labor market; unemployment; institutions;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy

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