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The Determinants of Unemployment across OECD Countries

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  • Andrea Bassanini

    () (ERMES - Equipe de recherche sur les marches, l'emploi et la simulation - UP2 - Université Panthéon-Assas - M.E.N.E.S.R. - Ministère de l'Éducation nationale, de l’Enseignement supérieur et de la Recherche - CNRS - Centre National de la Recherche Scientifique)

  • Romain Duval

    (ECO - Economics Department - OCDE)

Abstract

This paper explores the impact of policies and institutions on unemployment in OECD countries over the past decades. Reduced-form unemployment equations, consistent with standard wage setting/price-setting models, are estimated using cross-country/time-series data from 21 OECD countries over the period 1982-2003. In the “average” OECD country, high and long-lasting unemployment benefits, high tax wedges and stringent anti-competitive product market regulation are found to increase aggregate unemployment. By contrast, highly centralised and/or coordinated wage bargaining systems are estimated to reduce unemployment. These findings are robust across specifications, datasets and econometric methods. The paper also finds evidence of interactions across policies and institutions, as well as between institutions and shocks. Some specific interactions across policies and institutions are found to be particularly robust, notably between unemployment benefits and public spending on active labour market programmes as well as between statutory minimum wages and the tax wedge. Finally, it is shown that macroeconomic conditions also matter for unemployment patterns, with their impact being shaped by policies.

Suggested Citation

  • Andrea Bassanini & Romain Duval, 2006. "The Determinants of Unemployment across OECD Countries," Post-Print halshs-00120584, HAL.
  • Handle: RePEc:hal:journl:halshs-00120584
    Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00120584
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    Cited by:

    1. Flaig Gebhard & Rottmann Horst, 2009. "Labour Market Institutions and the Employment Intensity of Output Growth," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 229(1), pages 22-35, February.
    2. Bernhard Boockmann & Raimund Krumm & Michael Neumann & Pia Rattenhuber, 2013. "Turning the Switch: An Evaluation of the Minimum Wage in the German Electrical Trade Using Repeated Natural Experiments," German Economic Review, Verein für Socialpolitik, vol. 14(3), pages 316-348, August.
    3. Roberto Martino & Phu Nguyen-Van, 2014. "Labour market regulation and fiscal parameters: A structural model for European regions," Working Papers of BETA 2014-19, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    4. Bernhard Boockmann, 2010. "The Combined Employment Effects of Minimum Wages and Labor Market Regulation—a Meta-Analysis," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot, Berlin, vol. 61(Supplemen), pages 167-188.
    5. Antonio Bassanetti & Roberto Torrini & Francesco Zollino, "undated". "Changing Institutions in the European Market: the Impact on Mark-ups and Rents Allocation," Working Papers 11, Department of the Treasury, Ministry of the Economy and of Finance.
    6. Oesch, Daniel, 2009. "Explaining high unemployment among low-skilled workers: Evidence from 21 European and Anglo-Saxon countries, 1991-2006," MPRA Paper 21041, University Library of Munich, Germany.
    7. Anderton, Robert & Maria, José R. & Karšay, Alexander & Szörfi, Béla & Périnet, Mathilde & Petroulas, Pavlos & Beck Nelleman, Peter & Conefrey, Thomas & Veiga, Cindy & Zizza, Roberta & Verdugo, Gregor, 2015. "Comparisons and contrasts of the impact of the crisis on euro area labour markets," Occasional Paper Series 159, European Central Bank.
    8. Alexandre Janiak, 2010. "Structural unemployment and the regulation of product market," Documentos de Trabajo 274, Centro de Economía Aplicada, Universidad de Chile.
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    10. Andrea Bassanini & Romain Duval, 2009. "Unemployment, institutions, and reform complementarities: re-assessing the aggregate evidence for OECD countries," Oxford Review of Economic Policy, Oxford University Press, vol. 25(1), pages 40-59, Spring.
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    unemployment; institutions; shocks;

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