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Is Portugal really so arteriosclerotic? Results from a cross-country analysis of labor adjustment

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  • Addison, John T.
  • Teixeira, Paulino

Abstract

Reputation indexes of employment protection have proven popular constructs in studies of the covariation of labor market institutions and macroeconomic outcomes. Portugal occupies an unenviable rank order in such measures of the stringency of employment protection. We critique this reputation in two ways: first, by offering a modicum of 'corrective' institutional detail on the nature of employment protection in Portugal; and, second, and more substantively, by offering a detailed analysis of the process of labor djustment in Portugal, benchmarked to other-country experience. The latter exercise – based on a two- and one-stage error correction model – reveals Portugal to have a very high speed of adjustment to deviations from the long-run employment-output equilibrium – a result that is clearly at odds with its allegedly sclerotic labor market. More in accord with received wisdom is the very smooth labor adjustment mechanism characterizing the United Kingdom. The most notable feature of the German results is the deterioration in that country's speed of adjustment in recent years. The Spanish case is distinguished by its erratic path of long-run adjustment. --

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Bibliographic Info

Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 99-30.

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Date of creation: 1999
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Handle: RePEc:zbw:zewdip:5245

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  1. Olivier Blanchard & Pedro Portugal, 1998. "What Hides Behind an Umemployment Rate: Comparing Portuguese and U.S. Unemployment," NBER Working Papers 6636, National Bureau of Economic Research, Inc.
  2. Marimon, Ramon & Zilibotti, Fabrizio, 1998. "'Actual' versus 'virtual' employment in Europe Is Spain different?," European Economic Review, Elsevier, vol. 42(1), pages 123-153, January.
  3. Jeroen J.M. Kremers & Neil R. Ericsson & Juan J. Dolado, 1992. "The power of cointegration tests," International Finance Discussion Papers 431, Board of Governors of the Federal Reserve System (U.S.).
  4. Zivot, Eric & Andrews, Donald W K, 2002. "Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 25-44, January.
  5. Campbell, John & Perron, Pierre, 1991. "Pitfalls and Opportunities: What Macroeconomists Should Know about Unit Roots," Scholarly Articles 3374863, Harvard University Department of Economics.
  6. Giuseppe Bertola, 1991. "Labor Turnover Costs and Average Labor Demand," NBER Working Papers 3866, National Bureau of Economic Research, Inc.
  7. Phillips, Peter C B & Ouliaris, S, 1990. "Asymptotic Properties of Residual Based Tests for Cointegration," Econometrica, Econometric Society, vol. 58(1), pages 165-93, January.
  8. Olympia Bover & Pilar García-Perea & Pedro Portugal, 1998. "A Comparative Study of the Portuguese and Spanish Labour Markets," Banco de Espa�a Working Papers 9807, Banco de Espa�a.
  9. Katharine G. Abraham & Susan N. Houseman, 1994. "Does Employment Protection Inhibit Labor Market Flexibility? Lessons from Germany, France, and Belgium," Book chapters authored by Upjohn Institute researchers, in: Rebecca M. Blank (ed.), Social Protection Versus Economic Flexibility: Is There a Trade-off?, pages 59-93 W.E. Upjohn Institute for Employment Research.
  10. Katharine G. Abraham & Susan N. Houseman, 1990. "Job Security and Work Force Adjustment: How Different are U.S. and Japanese Practices?," NBER Working Papers 3155, National Bureau of Economic Research, Inc.
  11. Harvey, A C, et al, 1986. "Stochastic Trends in Dynamic Regression Models: An Application to the Employment-Output Equations," Economic Journal, Royal Economic Society, vol. 96(384), pages 975-85, December.
  12. Daniel S. Hamermesh, 1986. "The Demand for Workers and Hours and the Effects of Job Security Policies: Theory and Evidence," NBER Working Papers 2056, National Bureau of Economic Research, Inc.
  13. Blanchard, Olivier & Jimeno, Juan F, 1995. "Structural Unemployment: Spain versus Portugal," American Economic Review, American Economic Association, vol. 85(2), pages 212-18, May.
  14. Stock, James H., 1991. "Confidence intervals for the largest autoregressive root in U.S. macroeconomic time series," Journal of Monetary Economics, Elsevier, vol. 28(3), pages 435-459, December.
  15. Flaig, Gebhard & Steiner, Viktor, 1989. "Stability and Dynamic Properties of Labour Demand in West German Manufacturing," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 51(4), pages 395-412, November.
  16. Stephen Nickell, 1997. "Unemployment and Labor Market Rigidities: Europe versus North America," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 55-74, Summer.
  17. Bentolila, Samuel & Bertola, Giuseppe, 1990. "Firing Costs and Labour Demand: How Bad Is Eurosclerosis?," Review of Economic Studies, Wiley Blackwell, vol. 57(3), pages 381-402, July.
  18. Cardoso, Ana Rute, 1997. "Workers or Employers: Who Is Shaping Wage Inequality?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 59(4), pages 523-47, November.
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