Labor market institutions: Curse or blessing?
AbstractPrevious literature has identified considerable non-pecuniary costs to macroeconomic fluctuation and uncertainty. The present paper investigates whether and to what extent labor market institutions can mitigate those costs. We study how life satisfaction of European citizens is affected by employment protection and the level and duration of unemployment benefit payments. We differentiate between direct effects (at given macroeconomic conditions) and total effects (including the feedback through the institutions' effect on macroeconomic outcomes). We find that the total effect of employment protection is positive, whereas the total effect of benefit duration is negative. The direct and indirect effects of a higher benefit level nearly neutralize each other. --
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Bibliographic InfoPaper provided by University of Rostock, Institute of Economics in its series Thuenen-Series of Applied Economic Theory with number 62.
Date of creation: 2006
Date of revision:
unemployment benefit; employment protection; macroeconomic uncertainty; cost-benefit analysis; life satisfaction; happiness;
Find related papers by JEL classification:
- J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
- D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
- I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
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