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Unemployment and Finance: How Do Financial and Labour Market Factors Interact?

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  • Gatti, Donatella

    ()
    (University of Paris 13)

  • Vaubourg, Anne-Gaël

    ()
    (University of Orléans)

Abstract

Using data for 18 OECD countries over the period 1980-2004, we investigate how labour and financial factors interact to determine unemployment. We show that the impact of financial variables depends strongly on the labour market context. Increased market capitalization as well as decreased banking concentration reduce unemployment if the level of labour market regulation, union density and coordination in wage bargaining is low. The above financial variables have no effect otherwise. Increasing intermediated credit worsens unemployment when the labour market is weakly regulated and coordinated, whereas it reduces unemployment otherwise. These results suggest that the respective virtues of bank-based and market-based finance are crucially tied to the strength of labour regulation.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4075.

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Length: 29 pages
Date of creation: Mar 2009
Date of revision:
Handle: RePEc:iza:izadps:dp4075

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Keywords: unemployment; institutional complementarities and substitutabilities; labour market; financial system;

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Citations

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Cited by:
  1. Pietro Garibaldi, 2013. "Labor and Finance: Mortensen and Pissarides meet Holmstrom and Tirole," 2013 Meeting Papers 775, Society for Economic Dynamics.
  2. Boubtane, Ekrame & Coulibaly, Dramane & Rault, Christophe, 2012. "Immigration, Growth and Unemployment: Panel VAR Evidence from OECD Countries," IZA Discussion Papers 6966, Institute for the Study of Labor (IZA).
  3. repec:hal:journl:halshs-00639840 is not listed on IDEAS
  4. Dromel, Nicolas L. & Kolakez, Elie & Lehmann, Etienne, 2010. "Credit constraints and the persistence of unemployment," Labour Economics, Elsevier, vol. 17(5), pages 823-834, October.
  5. Tito Boeri & Pietro Garibaldi & Espen R. Moen, 2012. "The Labor Market Consequences of Adverse Financial Shocks," Working Papers 451, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  6. C. Giannetti & M. Madia & L. Moretti, 2013. "Job Insecurity and Financial Distress," Working Papers wp887, Dipartimento Scienze Economiche, Universita' di Bologna.
  7. Donatella Gatti & Anne-Gael Vaubourg, 2010. "Credit and Unemployment: Do Institutions Matter?," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, vol. 11(1), pages 37-43, 04.
  8. Thibault Darcillon, 2012. "Do Interactions between Finance and Labor Market Institutions Affect Wage Distribution ?," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00768908, HAL.
  9. Thibault Darcillon, 2011. "Political Partisanship and Financial Reforms in Advanced Countries," Documents de travail du Centre d'Economie de la Sorbonne 11063, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
  10. Sachs, Andreas, 2011. "Institutions and unemployment: Do interactions matter?," ZEW Discussion Papers 11-057, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  11. repec:hal:journl:halshs-00768908 is not listed on IDEAS
  12. repec:hal:cesptp:halshs-00639840 is not listed on IDEAS
  13. repec:hal:journl:halshs-00389762 is not listed on IDEAS
  14. Thibault Darcillon, 2012. "Do Interactions between Finance and Labor Market Institutions Affect Wage Distribution?," Documents de travail du Centre d'Economie de la Sorbonne 12089, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.

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