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How do Institutions Affect Structural Unemployment in Times of Crises?

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  • Davide Furceri
  • Annabelle Mourougane

Abstract

This paper examines the effect of economic crises on structural unemployment using an Autoregressive Distributed Lags model and accounting for the role of institutional settings. Analysing an unbalanced panel of 30 OECD economies from 1970 to 2008, we found that downturns have, on average, a significant positive impact on the level of structural unemployment rate. The maximum impact varies with the severity of the downturn. Institutions (such as Employment Protection Legislation, average replacement ratio and product market regulation) influence both the extent of the initial shock and the adjustment pattern in the aftermath of a downturn. Comment les institutions influencent-elles le chômage structurel en temps de crise ? Ce document examine l’effet des crises économiques sur le chômage structurel en utilisant un modèle Autorégressif à Retards Distribués et en prenant en compte l’effet des institutions. A partir d’un panel non cylindré de 30 économies de l’OCDE de 1970 à 2008, les crises économiques sont estimées avoir, en moyenne, un effet significatif et positif sur le niveau du taux de chômage structurel. L’effet maximal varie avec la sévérité de la crise. Les institutions (législation sur la protection de l’emploi, ratio de remplacement moyen et régulation sur les marchés des produits) influencent à la fois l’amplitude du choc initial et l’ajustement suivant le choc.

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File URL: http://dx.doi.org/10.1787/220734255421
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Bibliographic Info

Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 730.

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Date of creation: 03 Nov 2009
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Handle: RePEc:oec:ecoaaa:730-en

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Keywords: institutions; crisis; structural unemployment; employment protection legislation; institutions; législation sur la protection de l'emploi; chômage structurel; crise;

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References

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  1. Giuseppe Nicoletti & Stefano Scarpetta, 2005. "Product Market Reforms and Employment in OECD Countries," OECD Economics Department Working Papers 472, OECD Publishing.
  2. Giuseppe Bertola & Francine Blau & Lawrence Kahn, 2007. "Labor market institutions and demographic employment patterns," Journal of Population Economics, Springer, vol. 20(4), pages 833-867, October.
  3. Olivier Blanchard, 2005. "European Unemployment: The Evolution of Facts and Ideas," NBER Working Papers 11750, National Bureau of Economic Research, Inc.
  4. Kugler, Adriana D. & Pica, Giovanni, 2004. "Effects of Employment Protection and Product Market Regulations on the Italian Labour Market," CEPR Discussion Papers 4216, C.E.P.R. Discussion Papers.
  5. Adriana Kugler & Giovanni Pica, 2003. "The Effects of Employment Protection and Product Market Regulations on the Italian Labor Market," LABORatorio R. Revelli Working Papers Series 28, LABORatorio R. Revelli, Centre for Employment Studies.
  6. Valerie Cerra & Sweta Chaman Saxena, 2008. "Growth Dynamics: The Myth of Economic Recovery," American Economic Review, American Economic Association, vol. 98(1), pages 439-57, March.
  7. Fabian Valencia & Luc Laeven, 2008. "Systemic Banking Crises," IMF Working Papers 08/224, International Monetary Fund.
  8. Romain Duval & Jørgen Elmeskov & Lukas Vogel, 2007. "Structural Policies and Economic Resilience to Shocks," OECD Economics Department Working Papers 567, OECD Publishing.
  9. Giuseppe Bertola & Francine D. Blau & Lawrence M. Kahn, 2001. "Comparative Analysis of Labor Market Outcomes: Lessons for the US from International Long-Run Evidence," NBER Working Papers 8526, National Bureau of Economic Research, Inc.
  10. 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.
  11. Pierre-Olivier Beffy & Patrice Ollivaud & Pete Richardson & Franck Sédillot, 2006. "New OECD Methods for Supply-side and Medium-term Assessments: A Capital Services Approach," OECD Economics Department Working Papers 482, OECD Publishing.
  12. Pissarides, Christopher A., 2001. "Employment protection," Labour Economics, Elsevier, vol. 8(2), pages 131-159, May.
  13. Annabelle Mourougane & Lukas Vogel, 2008. "Speed of Adjustment to Selected Labour Market and Tax Reforms," OECD Economics Department Working Papers 647, OECD Publishing.
  14. Duval, Romain & Elmeskov, Jørgen, 2006. "The effects of EMU on structural reforms in labour and product markets," Working Paper Series 0596, European Central Bank.
  15. Pete Richardson & Laurence Boone & Claude Giorno & Mara Meacci & David Rae & David Turner, 2000. "The Concept, Policy Use and Measurement of Structural Unemployment: Estimating a Time Varying NAIRU Across 21 OECD Countries," OECD Economics Department Working Papers 250, OECD Publishing.
  16. Davide Furceri & Annabelle Mourougane, 2009. "The Effect of Financial Crises on Potential Output: New Empirical Evidence from OECD Countries," OECD Economics Department Working Papers 699, OECD Publishing.
  17. Anita Wölfl & Isabelle Wanner & Tomasz Kozluk & Giuseppe Nicoletti, 2009. "Ten Years of Product Market Reform in OECD Countries: Insights from a Revised PMR Indicator," OECD Economics Department Working Papers 695, OECD Publishing.
  18. Laurence M. Ball, 2009. "Hysteresis in Unemployment: Old and New Evidence," NBER Working Papers 14818, National Bureau of Economic Research, Inc.
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Cited by:
  1. Elisa Gamberoni & Erik Von Uexkull & Sebastian Weber, 2010. "The Roles of Openness and Labor Market Institutions for Employment Dynamics during Economic Crises," World Bank Other Operational Studies 10155, The World Bank.
  2. Horst Feldmann, 2012. "Product Market Regulation and Labor Market Performance around the World," LABOUR, CEIS, vol. 26(3), pages 369-391, 09.
  3. Bernal-Verdugo, Lorenzo E. & Furceri, Davide & Guillaume, Dominique, 2013. "Banking crises, labor reforms, and unemployment," Journal of Comparative Economics, Elsevier, vol. 41(4), pages 1202-1219.
  4. Romain Bouis & Romain Duval, 2011. "Raising Potential Growth After the Crisis: A Quantitative Assessment of the Potential Gains from Various Structural Reforms in the OECD Area and Beyond," OECD Economics Department Working Papers 835, OECD Publishing.
  5. Davide Furceri & Lorenzo E. Bernal-Verdugo & Dominique M. Guillaume, 2012. "Crises, Labor Market Policy, and Unemployment," IMF Working Papers 12/65, International Monetary Fund.
  6. Annabelle Mourougane & Davide Furceri, 2010. "Une lecture de la crise à la lumière des crises passées," Économie et Statistique, Programme National Persée, vol. 438(1), pages 19-42.

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