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Unemployment and finance: how do financial and labour market factors interact?

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  • Donatella Gatti

    ()

  • Christophe Rault

    ()

  • Anne-Gael Vaubourg

    ()

Abstract

sing annual data for 18 OECD countries over the period 1980-2004, we investigate how labour and financial factors interact to determine unemployment by estimating a dynamic panel model using the system generalized method of moments (GMM). 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 and banking concentration is beneficial for employment when the degree of labour market regulation, union density and coordination in wage bargaining is high. These results suggest that the respective virtues of ed and market-based finance are crucially tied to the labour market context.

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Paper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number wp973.

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Length: pages
Date of creation: 01 Jan 2010
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Handle: RePEc:wdi:papers:2010-973

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Keywords: Unemployment; institutional complementarities and substituabilities; labour market; financial system.;

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Cited by:
  1. repec:hal:journl:halshs-00768908 is not listed on IDEAS
  2. Sachs, Andreas, 2011. "Institutions and unemployment: Do interactions matter?," ZEW Discussion Papers, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research 11-057, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  3. 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).
  4. 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.
  5. Dromel, Nicolas & Kolakez, Elie & Lehmann, Etienne, 2009. "Credit Constraints and the Persistence of Unemployment," IZA Discussion Papers 4501, Institute for the Study of Labor (IZA).
  6. Boeri, Tito & Garibaldi, Pietro & Moen, Espen R., 2012. "The Labor Market Consequences of Adverse Financial Shocks," IZA Discussion Papers 6826, Institute for the Study of Labor (IZA).
  7. Pietro Garibaldi, 2013. "Labor and Finance: Mortensen and Pissarides meet Holmstrom and Tirole," 2013 Meeting Papers, Society for Economic Dynamics 775, Society for Economic Dynamics.
  8. C. Giannetti & M. Madia & L. Moretti, 2013. "Job Insecurity and Financial Distress," Working Papers wp887, Dipartimento Scienze Economiche, Universita' di Bologna.
  9. repec:hal:journl:halshs-00389762 is not listed on IDEAS
  10. Donatella Gatti & Anne-Gael Vaubourg, 2010. "Credit and Unemployment: Do Institutions Matter?," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, Ifo Institute for Economic Research at the University of Munich, vol. 11(1), pages 37-43, 04.
  11. Thibault Darcillon, 2011. "Political Partisanship and Financial Reforms in Advanced Countries," Documents de travail du Centre d'Economie de la Sorbonne, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne 11063, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
  12. Thibault Darcillon, 2012. "Do Interactions between Finance and Labor Market Institutions Affect Wage Distribution?," Documents de travail du Centre d'Economie de la Sorbonne, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne 12089, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
  13. repec:hal:journl:halshs-00639840 is not listed on IDEAS
  14. Thibault Darcillon, 2011. "Political Partisanship and Financial Reforms in Advanced Countries," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00639840, HAL.

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