How do Institutions Affect Structural Unemployment in Times of Crises?

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How do Institutions Affect Structural Unemployment in Times of Crises?

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Davide Furceri
Annabelle Mourougane

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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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Paper provided by OECD, Economics Department 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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Find related papers by JEL classification:
E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
H10 - Public Economics - - Structure and Scope of Government - - - General

This paper has been announced in the following NEP Reports:

NEP-ALL-2009-11-14 (All new papers)
NEP-LAB-2009-11-14 (Labour Economics)

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