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Institutions, unemployment and inactivity in the OECD countries

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Author Info
Bruno Amable
Lilas Demmou
Donatella Gatti

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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. New institutional series are proposed, namely to account for unemployment insurance net replacement rates and employment protection legislation (EPL). Among other results, we find strong evidence of a positive effect of EPL on employment performance as well as of possible complementarities across product and labour markets regulation.

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Paper provided by PSE (Ecole normale supérieure) in its series PSE Working Papers with number 2006-16.

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Date of creation: 2006
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Handle: RePEc:pse:psecon:2006-16

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  2. John Schmitt & Jonathan Wadsworth, 2002. "Is the OECD Jobs Strategy Behind US and British Employment and Unemployment Success in the 1990s?," SCEPA Working Papers 2002-06, Schwartz Center for Economic Policy Analysis (SCEPA), New School University. [Downloadable!]
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  4. 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)
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  5. 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)
  6. 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), New School University. [Downloadable!]
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  7. Olivier Blanchard & Francesco Giavazzi, 2003. "Macroeconomic Effects Of Regulation And Deregulation In Goods And Labor Markets," The Quarterly Journal of Economics, MIT Press, vol. 118(3), pages 879-907, August. [Downloadable!] (restricted)
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  8. 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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  17. Siebert, Horst, 1997. "Labor Market Rigidities: At the Root of Unemployment in Europe," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 37-54, Summer. [Downloadable!] (restricted)
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  19. 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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  20. Coe, David T & Snower, Dennis J., 1997. "Policy Complementarities: The Case for Fundamental Labour Market Reform," CEPR Discussion Papers 1585, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  21. Nickell, Stephen, 1997. "Unemployment and Labor Market Rigidities: Europe versus North America," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 55-74, Summer. [Downloadable!] (restricted)
  22. 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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  23. 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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  25. Díaz-Vázquez, María del Pilar & Snower, Dennis J., 1996. "Employment, Macroeconomic Fluctuations and Job Security," CEPR Discussion Papers 1430, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  27. David Soskice & Torben Iversen, 2000. "The Nonneutrality Of Monetary Policy With Large Price Or Wage Setters," The Quarterly Journal of Economics, MIT Press, vol. 115(1), pages 265-284, February. [Downloadable!] (restricted)
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  29. Acemoglu, Daron, 2001. "Credit market imperfections and persistent unemployment," European Economic Review, Elsevier, vol. 45(4-6), pages 665-679, May. [Downloadable!] (restricted)
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  30. Nickell, Stephen, 1999. "Product markets and labour markets1," Labour Economics, Elsevier, vol. 6(1), pages 1-20, March. [Downloadable!] (restricted)
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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. Beckmann, Rainer, 2007. "Profitability of Western European banking systems: panel evidence on structural and cyclical determinants," Discussion Paper Series 2: Banking and Financial Studies 2007,17, Deutsche Bundesbank, Research Centre. [Downloadable!]
  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!]
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  3. Giuseppe Fiori & Giuseppe Nicoletti & Stefano Scarpetta & Fabio Schiantarelli, 2007. "Employment Outcomes and the Interaction Between Product and Labor Market Deregulation: Are They Substitutes or Complements?," Boston College Working Papers in Economics 663, Boston College Department of Economics, revised 08 Aug 2008. [Downloadable!]
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