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From wage rigidity to labour market institution rigidity: A turning-point in explaining unemployment?

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  • Guerrazzi, Marco
  • Meccheri, Nicola

Abstract

In this paper we offer a critical discussion about the concept of labour market rigidity in the light of recent theoretical approaches that have aimed to provide sound micro-foundations to the presence of unemployment in market economies. We point out that the concept of labour market rigidity usually referred to in such theories has changed over time, involving in succession the rigidity of wages, contracts and labour market institutions. We also appraise the factors that lead labour market institutions rigidity, stressed by the search literature, to challenge the more widespread explanation of unemployment grounded on wage rigidity. Moreover, we analyse some theoretical and empirical issues that cast doubt on the ability to deal with unemployment, disentangling the role of institutional rigidities from that of wage stickiness.

Suggested Citation

  • Guerrazzi, Marco & Meccheri, Nicola, 2012. "From wage rigidity to labour market institution rigidity: A turning-point in explaining unemployment?," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 41(2), pages 189-197.
  • Handle: RePEc:eee:soceco:v:41:y:2012:i:2:p:189-197 DOI: 10.1016/j.socec.2011.12.001
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    More about this item

    Keywords

    Wages; Labour market institutions; Unemployment; Search theory;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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