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Labor market institutions: Curse or blessing?

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  • Ochsen, Carsten
  • Welsch, Heinz

Abstract

Previous 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.

Suggested Citation

  • Ochsen, Carsten & Welsch, Heinz, 2006. "Labor market institutions: Curse or blessing?," Thuenen-Series of Applied Economic Theory 62, University of Rostock, Institute of Economics.
    • Handle: RePEc:zbw:roswps:62
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    References listed on IDEAS

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    More about this item

    Keywords

    unemployment benefit; employment protection; macroeconomic uncertainty; cost-benefit analysis; life satisfaction; happiness;
    All these keywords.

    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; Aggregate Human Capital; Aggregate Labor Productivity
    • 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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