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Labor Market Institutions and Unemployment: A Critical Assessment of the Cross-Country Evidence

This paper provides a critical view of the cross country literature on the impact of labour market institutions and policies on the evolving pattern of unemployment in OECD countries. Such widely used indicators as the generosity of unemployment insurance or the strength of trade unions are neither strongly correlated individually with unemployment nor contribute robust and well defined impacts on unemployment within increasingly sophisticated multivariate literature. Our own tests, with a comprehensive data set covering 1960-99, show how dependent the estimated effects are to the particular indicators used and periods covered and overall suggest that a relatively minor role for the institutions and policies in accounting for unemployment patterns.

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File URL: http://www.economicpolicyresearch.org/scepa/publications/workingpapers/2002/paper168.pdf
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Paper provided by Schwartz Center for Economic Policy Analysis (SCEPA), The New School in its series SCEPA working paper series. SCEPA's main areas of research are macroeconomic policy, inequality and poverty, and globalization. with number 2002-17.

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Length: 69 pages
Date of creation: 08 Nov 2002
Date of revision:
Handle: RePEc:epa:cepawp:2002-17
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  1. Olivier Blanchard & Justin Wolfers, 1999. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," NBER Working Papers 7282, National Bureau of Economic Research, Inc.
  2. 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.
  3. Michael Bruno & Jeffrey D. Sachs, 1985. "Economics of Worldwide Stagflation," NBER Books, National Bureau of Economic Research, Inc, number brun85-1, 07.
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