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Labor market institutions and macroeconomic volatility in a panel of OECD countries

  • Rumler, Fabio
  • Scharler, Johann

In this paper we analyze empirically how labor market institutions influence business cycle volatility in a sample of 20 OECD countries. Our results suggest that countries characterized by high union density tend to experience more volatile movements in output, whereas the degree of coordination of the wage bargaining system and strictness of employment protection legislation appear to play a limited role for output volatility. We also find some evidence suggesting that highly coordinated wage bargaining systems have a dampening impact on inflation volatility. JEL Classification: E31, E32

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Paper provided by European Central Bank in its series Working Paper Series with number 1005.

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Date of creation: Feb 2009
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Handle: RePEc:ecb:ecbwps:20091005
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