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The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence

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  • Blanchard, Olivier
  • Wolfers, Justin

Abstract

Two key facts about European unemployment must be explained: the rise in unemployment since the 1960s, and the heterogeneity of individual country experiences. While adverse shocks can potentially explain much of the rise in unemployment, there is insufficient heterogeneity in these shocks to explain cross-country differences. Alternatively, while explanations focusing on labour market institutions explain current heterogeneity well, many of these institutions pre-date the rise in unemployment. Based on a panel of institutions and shocks for 20 OECD nations since 1960 we find that the interaction between shocks and institutions is crucial to explaining both stylised facts.

Suggested Citation

  • 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 1-33, March.
  • Handle: RePEc:ecj:econjl:v:110:y:2000:i:462:p:c1-33
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • E29 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Other
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General

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