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Employment Performance and Institutions: New Answers to an Old Question

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Author Info
Bruno Amable () (University of Paris I and CEPREMAP)
Lilas Demmou () (CEPREMAP)
Donatella Gatti () (University of Paris 13, CEPN, CEPREMAP and IZA)

Additional information is available for the following registered author(s):

Abstract

This paper provides new evidence on the linkages between a large array of institutional arrangements (on product, labour and financial markets) and employment performance. Our analysis includes unemployment, inactivity and jobless rates, thus allowing us to control for possible substitution effects across situations of non-employment and to check whether institutional rigidities affecting unemployment impact inactivity along the same line. To cope with common problems related to the inclusion of time-invariant institutional variables in fixed effects models, we present results of regressions based on three different estimators: PCSE, GLS and FEVD, the last one being a new procedure specifically designed to treat slowly changing variables. We build time series data to account for annual evolution of employment protection legislation (EPL), and use new data for unemployment insurance net replacement rates. Moreover, we check for interdependencies across product and labour markets legislation by investigating the marginal impact of selected institutional variables. Among other results, we find evidence of a positive effect of EPL on employment performance as well as of a substitutability relationship across product and labour markets regulation policies.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2731.

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Length: 44 pages
Date of creation: Apr 2007
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Handle: RePEc:iza:izadps:dp2731

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Related research
Keywords: unemployment; inactivity; institutions; time-invariant variables;

Other versions of this item:

Find related papers by JEL classification:
E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Boeri, Tito & Nicoletti, Giuseppe & Scarpetta, Stefano, 2000. "Regulation And Labour Market Performance," CEPR Discussion Papers 2420, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  2. Francesco Lippi, 2003. "Strategic Monetary Policy with Non-Atomistic Wage Setters," Review of Economic Studies, Blackwell Publishing, vol. 70(4), pages 909-919, October. [Downloadable!] (restricted)
    Other versions:
  3. Bruno Amable & Donatella Gatti, 2004. "Product market competition, job security, and aggregate employment," Oxford Economic Papers, Oxford University Press, vol. 56(4), pages 667-686, October. [Downloadable!] (restricted)
  4. Dean Baker & Andrew Glyn & David Howell & John Schmitt, 2002. "Labor Market Institutions and Unemployment: A Critical Assessment of the Cross-Country Evidence," SCEPA Working Papers 2002-17, Schwartz Center for Economic Policy Analysis (SCEPA), The New School. [Downloadable!]
    Other versions:
  5. Wasmer, Etienne & Weil, Philippe, 2002. "The Macroeconomics of Labour and Credit Market Imperfections," CEPR Discussion Papers 3334, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  6. Olivier Blanchard, 2005. "European Unemployment: The Evolution of Facts and Ideas," NBER Working Papers 11750, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Richard B. Freeman, 2005. "Labour Market Institutions Without Blinders: The Debate over Flexibility and Labour Market Performance," NBER Working Papers 11286, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  8. Amable, Bruno & Gatti, Donatella, 2004. "Labour and Product Market Reforms: A Case for Policy Complementarity," IZA Discussion Papers 1190, Institute for the Study of Labor (IZA). [Downloadable!]
  9. Murphy, Kevin M & Topel, Robert H, 1997. "Unemployment and Nonemployment," American Economic Review, American Economic Association, vol. 87(2), pages 295-300, May. [Downloadable!] (restricted)
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  11. 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 C1-33, March. [Downloadable!] (restricted)
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  13. Bruno Amable & Donatella Gatti & Jan Schumacher, 2006. "Welfare state retrenchment: The partisan effect revisited," PSE Working Papers 2006-07, PSE (Ecole normale supérieure). [Downloadable!]
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  14. Koeniger, Winfried & Vindigni, Andrea, 2003. "Employment Protection and Product Market Regulation," IZA Discussion Papers 880, Institute for the Study of Labor (IZA). [Downloadable!]
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Gatti, Donatella, 2008. "Macroeconomic Effects of Ownership Structure in OECD Countries," IZA Discussion Papers 3415, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  2. Eichhorst, Werner & Feil, Michael & Braun, Christoph, 2008. "What have we learned? Assessing labor market institutions and indicators," IAB Discussion Paper 200822, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany]. [Downloadable!]
    Other versions:
  3. Simon Deakin & Prabirjit Sarkar, 2008. "Assessing the Long-Run Economic Impact of Labour Law Systems: A Theoretical Reappraisal and Analysis of New Time Series Data," WEF Working Papers 0043, ESRC World Economy and Finance Research Programme, Birkbeck, University of London. [Downloadable!]
    Other versions:
  4. Bruno AMABLE (Université Paris I and CEPREMAP) & Yannick LUNG (GREThA UMR CNRS 5113 and GERPISA), 2008. "The European Socio-Economic Models of a Knowledge-based society. \r\nMain findings and conclusion \r\n," Cahiers du GREThA 2008-26, Groupe de Recherche en Economie Théorique et Appliquée. [Downloadable!]
  5. Michael Landesmann & Hermine Vidovic & Vladimir Gligorov & Robert Stehrer & Anna Iara, 2008. "Western Balkan Countries: Adjustment Capacity to External Shocks, with a Focus on Labour Markets," Research Reports 352, The Vienna Institute for International Economic Studies, wiiw. [Downloadable!]
  6. Gatti, Donatella & Vaubourg, Anne-Gaël, 2009. "Unemployment and Finance: How Do Financial and Labour Market Factors Interact?," IZA Discussion Papers 4075, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  7. Martin Schindler, 2009. "The Italian Labor Market: Recent Trends, Institutions, and Reform Options," IMF Working Papers 09/47, International Monetary Fund. [Downloadable!]
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