IDEAS home Printed from https://ideas.repec.org/p/lmu/muenar/20367.html
   My bibliography  Save this paper

Labour market institutions and unemployment: An international panel data analysis

Author

Listed:
  • Flaig, Gebhard
  • Rottmann, Horst

Abstract

This paper deals with the effects of labour market institutions on unemployment in a panel of 19 OECD countries for the period 1960-2000. In contrast to many other studies, we use long time series and analyse cyclically adjusted trend values of the unemployment rate. Our novel contribution is the estimation of panel models where we allow for heterogeneous effects of institutions on unemployment. Our main results are, first, that on the average tighter employment protection, a higher tax burden on labour income and a more generous unemployment insurance system increase, whereas a higher centralization of wage negotiations decreases unemployment, and secondly, that the magnitude of the effects of institutions differs considerably between countries.

Suggested Citation

  • Flaig, Gebhard & Rottmann, Horst, 2013. "Labour market institutions and unemployment: An international panel data analysis," Munich Reprints in Economics 20367, University of Munich, Department of Economics.
  • Handle: RePEc:lmu:muenar:20367
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Stephen Nickell, 2003. "Labour Market Institutions and Unemployment in OECD Countries," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 1(2), pages 13-26, October.
    2. Flaig Gebhard & Rottmann Horst, 2009. "Labour Market Institutions and the Employment Intensity of Output Growth," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 229(1), pages 22-35, February.
    3. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780199279173.
    4. 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.
    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. Andrea Bassanini & Romain Duval, 2007. "The determinants of unemployment across OECD countries: Reassessing the role of policies and institutions," OECD Economic Studies, OECD Publishing, vol. 2006(1), pages 7-86.
    7. Julián Messina, 2005. "Institutions and Service Employment: A Panel Study for OECD Countries," LABOUR, CEIS, vol. 19(2), pages 343-372, June.
    8. Fitzenberger Bernd & Franz Wolfgang & Bode Oliver, 2008. "The Phillips Curve and NAIRU Revisited: New Estimates for Germany," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 228(5-6), pages 465-496, October.
    9. Winfried Koeniger & Julien Prat, 2007. "Employment Protection, Product Market Regulation and Firm Selection," Economic Journal, Royal Economic Society, vol. 117(521), pages 302-332, June.
    10. Rafael Lalive & Jan Van Ours & Josef Zweimuller, 2006. "How Changes in Financial Incentives Affect the Duration of Unemployment," Review of Economic Studies, Oxford University Press, vol. 73(4), pages 1009-1038.
    11. Gomez-Salvador, Ramon & Messina, Julian & Vallanti, Giovanna, 2004. "Gross job flows and institutions in Europe," Labour Economics, Elsevier, vol. 11(4), pages 469-485, August.
    12. Andrea Bassanini & Romain Duval, 2006. "The Determinants of Unemployment across OECD Countries," Post-Print halshs-00120584, HAL.
    13. Assar Lindbeck, 1993. "Unemployment and Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121751, December.
    14. repec:ilo:ilowps:374124 is not listed on IDEAS
    15. 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.
    16. Kjell Erik Lommerud & Odd Rune Straume, 2012. "Employment Protection Versus Flexicurity: On Technology Adoption in Unionised Firms," Scandinavian Journal of Economics, Wiley Blackwell, vol. 114(1), pages 177-199, March.
    17. Robert J. Gordon, 1997. "The Time-Varying NAIRU and Its Implications for Economic Policy," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 11-32, Winter.
    18. Nickell, Stephen & Layard, Richard, 1999. "Labor market institutions and economic performance," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 46, pages 3029-3084, Elsevier.
    19. repec:ces:ifodic:v:1:y:2003:i:2:p:14567946 is not listed on IDEAS
    20. Stephen Nickell & Luca Nunziata & Wolfgang Ochel, 2005. "Unemployment in the OECD Since the 1960s. What Do We Know?," Economic Journal, Royal Economic Society, vol. 115(500), pages 1-27, January.
    21. Pissarides, Christopher A., 1998. "The impact of employment tax cuts on unemployment and wages; The role of unemployment benefits and tax structure," European Economic Review, Elsevier, vol. 42(1), pages 155-183, January.
    22. Katz, Lawrence F. & Meyer, Bruce D., 1990. "The impact of the potential duration of unemployment benefits on the duration of unemployment," Journal of Public Economics, Elsevier, vol. 41(1), pages 45-72, February.
    23. Ms. Jianping Zhou, 2007. "Danish for All? Balancing Flexibility with Security: The Flexicurity Model," IMF Working Papers 2007/036, International Monetary Fund.
    24. Cameron,A. Colin & Trivedi,Pravin K., 2005. "Microeconometrics," Cambridge Books, Cambridge University Press, number 9780521848053, October.
    25. Rachel Griffith & Rupert Harrison & Gareth Macartney, 2007. "Product Market Reforms, Labour Market Institutions and Unemployment," Economic Journal, Royal Economic Society, vol. 117(519), pages 142-166, March.
    26. Eric J. Bartelsman & Pieter A. Gautier & Joris De Wind, 2016. "Employment Protection, Technology Choice, And Worker Allocation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 57(3), pages 787-826, August.
    27. 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].
    28. García, José Ramón & Sala, Hector, 2008. "The tax system incidence on unemployment: A country-specific analysis for the OECD economies," Economic Modelling, Elsevier, vol. 25(6), pages 1232-1245, November.
    29. Summers, Lawrence H, 1989. "Some Simple Economics of Mandated Benefits," American Economic Review, American Economic Association, vol. 79(2), pages 177-183, May.
    30. Martin Werding (ed.), 2006. "Structural Unemployment in Western Europe: Reasons and Remedies," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262232464, December.
    31. 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.
    32. Edward P. Lazear, 1990. "Job Security Provisions and Employment," The Quarterly Journal of Economics, Oxford University Press, vol. 105(3), pages 699-726.
    33. Stephen Nickell, 2003. "Labour Market Institutions and Unemployment in OECD Countries," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 1(02), pages 13-26, October.
    34. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-444, June.
    35. Andrea Bassanini & Romain Duval, 2006. "Employment Patterns in OECD Countries: Reassessing the Role of Policies and Institutions," OECD Social, Employment and Migration Working Papers 35, OECD Publishing.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jesus Ferreiro & Carmen Gomez, 2022. "Employment protection, employment and unemployment rates in European Union countries during the Great Recession," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 25(3), pages 240-258, July.
    2. Ramskogler, Paul, 2021. "Labour market hierarchies and the macro-economy – Do labour market dualities affect wage growth in Europe?," Structural Change and Economic Dynamics, Elsevier, vol. 56(C), pages 154-165.
    3. Jesus Ferreiro & Carmen Gómez, 2018. "Employment protection and labour market performance in European Union countries during the Great Recession," FMM Working Paper 31-2018, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    4. Rottmann, Horst, 2014. "Do unemployment benefits and employment protection influence suicide mortality? An international panel data analysis," Weidener Diskussionspapiere 42, University of Applied Sciences Amberg-Weiden (OTH).
    5. Ronald Bachmann & Rahel Felder, 2021. "Labour market transitions, shocks and institutions in turbulent times: a cross-country analysis," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 48(2), pages 329-352, May.
    6. Auer, Benjamin R. & Rottmann, Horst, 2019. "Have capital market anomalies worldwide attenuated in the recent era of high liquidity and trading activity?," Journal of Economics and Business, Elsevier, vol. 103(C), pages 61-79.
    7. Juan González Alegre, 2017. "The Efficiency of Active Labour Market Policies in the European Union: Does It Make Sense Increasing the Bill?," Acta Oeconomica, Akadémiai Kiadó, Hungary, vol. 67(3), pages 333-357, September.
    8. Jesus Ferreiro & Carmen Gomez, 2020. "Employment protection and labor market results in Europe," Journal of Evolutionary Economics, Springer, vol. 30(2), pages 401-449, April.
    9. Hegeland, Erik & Taalbi, Josef, 2019. "What determines unemployment in the long run? Band spectrum regression on ten countries," Lund Papers in Economic History 203, Lund University, Department of Economic History.
    10. Koffi Kpognon & Henri Atangana Ondoa & Mamadou Bah & Marie Fanny Messe, 2020. "Ouverture commerciale, institutions du marché du travail et emploi des jeunes en Afrique," African Development Review, African Development Bank, vol. 32(S1), pages 91-105, November.
    11. Hegelund, Erik & Taalbi, Josef, 2023. "What determines unemployment in the long run? Band spectrum regression on ten countries 1913–2016," Structural Change and Economic Dynamics, Elsevier, vol. 64(C), pages 144-167.
    12. Heimberger, Philipp & Kapeller, Jakob & Schütz, Bernhard, 2017. "The NAIRU determinants: What’s structural about unemployment in Europe?," Journal of Policy Modeling, Elsevier, vol. 39(5), pages 883-908.
    13. Engelbert Stockhammer & Alexander Guschanski & Karsten Köhler, 2014. "Unemployment, capital accumulation and labour market institutions in the Great Recession," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 11(2), pages 182-194, September.
    14. Helmut Herwartz & Annekatrin Niebuhr, 2017. "Regional Labor Market Performance in Europe," International Regional Science Review, , vol. 40(3), pages 270-296, May.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gebhard Flaig & Horst Rottmann, 2011. "Labour Market Institutions and Unemployment. An International Comparison," CESifo Working Paper Series 3558, CESifo.
    2. Flaig Gebhard & Rottmann Horst, 2009. "Labour Market Institutions and the Employment Intensity of Output Growth," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 229(1), pages 22-35, February.
    3. Johanna Kemper, 2016. "Resolving the Ambiguity: A Meta-Analysis of the Effect of Employment Protection on Employment and Unemployment," KOF Working papers 16-405, KOF Swiss Economic Institute, ETH Zurich.
    4. Howell David R. & Baker Dean & Glyn Andrew & Schmitt John, 2007. "Are Protective Labor Market Institutions at the Root of Unemployment? A Critical Review of the Evidence," Capitalism and Society, De Gruyter, vol. 2(1), pages 1-73, May.
    5. Christoph S. Weber, 2020. "The unemployment effect of central bank transparency," Empirical Economics, Springer, vol. 59(6), pages 2947-2975, December.
    6. Costain, James S. & Reiter, Michael, 2008. "Business cycles, unemployment insurance, and the calibration of matching models," Journal of Economic Dynamics and Control, Elsevier, vol. 32(4), pages 1120-1155, April.
    7. Aurélien GAIMON & Vincent LAPEGUE & Paola MONPERRUS-VERONI & Noé N’SEMI & Frédéric REYNÈS & Maël THEULIERE, 2007. "Does the interaction between shocks and institutions solve the OECD unemployment puzzle? a Theoretical and Empirical Appraisal," Documents de Travail de l'OFCE 2007-34, Observatoire Francais des Conjonctures Economiques (OFCE).
    8. Aurélien Gaimon & Vincent Lapegue & Paola Veroni & Noé N'Semi & Frédéric Reynés & Maël Theulière, 2007. "Does the interaction between shocks and institutions solve the OECD unemployment puzzle ? A theoretical and empirical appraisal," Working Papers hal-03602950, HAL.
    9. repec:hal:wpspec:info:hdl:2441/6120 is not listed on IDEAS
    10. repec:hal:spmain:info:hdl:2441/6120 is not listed on IDEAS
    11. Aurélien Gaimon & Vincent Lapegue & Paola Veroni & Noé N'Semi & Frédéric Reynés & Maël Theulière, 2007. "Does the interaction between shocks and institutions solve the OECD unemployment puzzle ? A theoretical and empirical appraisal," SciencePo Working papers Main hal-03602950, HAL.
    12. Beissinger, Thomas, 2003. "Strukturelle Arbeitslosigkeit in Europa: Eine Bestandsaufnahme," University of Regensburg Working Papers in Business, Economics and Management Information Systems 389, University of Regensburg, Department of Economics.
    13. Thiess Büttner & Peter Egger & Herbert Hofmann & Christian Holzner & Mario Larch & Volker Meier & Chang Woon Nam & Rigmar Osterkamp & Rüdiger Parsche & Martin Werding, 2006. "Tu felix Austria: Wachstums- und Beschäftigungspolitik in Österreich und Deutschland im Vergleich," ifo Forschungsberichte, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 31, March.
    14. repec:hal:spmain:info:hdl:2441/9726 is not listed on IDEAS
    15. García, José Ramón & Sala, Hector, 2008. "The tax system incidence on unemployment: A country-specific analysis for the OECD economies," Economic Modelling, Elsevier, vol. 25(6), pages 1232-1245, November.
    16. Tito Boeri & Jan van Ours, 2013. "The Economics of Imperfect Labor Markets: Second Edition," Economics Books, Princeton University Press, edition 1, number 10142.
    17. Gebhard Flaig & Horst Rottmann, 2007. "Labour Market Institutions and the Employment Intensity of Output Growth. An International Comparison," CESifo Working Paper Series 2175, CESifo.
    18. repec:spo:wpecon:info:hdl:2441/6120 is not listed on IDEAS
    19. Beissinger, Thomas, 2003. "Strukturelle Arbeitslosigkeit in Europa : eine Bestandsaufnahme (Structural unemployment in Europe * an inventory)," Mitteilungen aus der Arbeitsmarkt- und Berufsforschung, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 36(4), pages 411-427.
    20. Frédéric Reynés & Paola Veroni & Aurélien Gaimon & Vincent Lapegue & Noé N'Semi & Maël Theulière, 2008. "Does the interaction between shocks and institutions solve the OECD shocks and institutions solve the OECD Unemployment Puzzle ? A Theoritical and Empirical Appraisal," Sciences Po publications info:hdl:2441/9726, Sciences Po.
    21. repec:spo:wpecon:info:hdl:2441/9726 is not listed on IDEAS
    22. repec:hal:wpspec:info:hdl:2441/9726 is not listed on IDEAS
    23. Aurélien Gaimon & Vincent Lapegue & Noé N'Semi & Frédéric Reynés & Maël Theulière & Paola Veroni, 2008. "Does the interaction between shocks and institutions solve the OECD unemployment puzzle ? A theoritical and empirical appraisal," Post-Print hal-03602948, HAL.
    24. Aurélien Gaimon & Vincent Lapegue & Noé N'Semi & Frédéric Reynés & Maël Theulière & Paola Veroni, 2008. "Does the interaction between shocks and institutions solve the OECD unemployment puzzle ? A theoritical and empirical appraisal," SciencePo Working papers Main hal-03602948, HAL.
    25. Beissinger, Thomas, 2003. "Strukturelle Arbeitslosigkeit in Europa : eine Bestandsaufnahme (Structural unemployment in Europe * an inventory)," Mitteilungen aus der Arbeitsmarkt- und Berufsforschung, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 36(4), pages 411-427.
    26. H Buscher & C Dreger & R Ramos & J Surinach, 2009. "The Impact of Institutions on the Employment Performance in European Labour Markets," Economic Issues Journal Articles, Economic Issues, vol. 14(1), pages 17-34, March.

    More about this item

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:lmu:muenar:20367. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Tamilla Benkelberg (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.