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Labor market reforms and unemployment dynamics

Author

Listed:
  • Fabrice Murtin

    (Institute for Fiscal Studies)

  • Jean-Marc Robin

    () (Institute for Fiscal Studies and cemmap and Sciences Po)

Abstract

In this paper, we quantify the contribution of labor market reforms to unemployment dynamics in nine OECD countries (Australia, France, Germany, Japan, Portugal, Spain, Sweden, the United Kingdom and the United States). We build and estimate a dynamic stochastic search-matching model with heterogeneous workers, where aggregate shocks to productivity fuel up the cycle, and unanticipated policy interventions shift structural parameters and displace the long-term equilibrium. We show that the heterogeneous-worker mechanism proposed by Robin (2011) to explain unemployment volatility by productivity shocks works well in all countries. The amount of resources injected into placement and employment services, the reduction of UI benefits and product market deregulation stand out as the most prominent policy levers for unemployment reduction. All other LMPs have a significant but lesser impact. We also find that business cycle shocks and LMPs explain about the same share of unemployment volatility (except for Japan, Portugal and the US).

Suggested Citation

  • Fabrice Murtin & Jean-Marc Robin, 2014. "Labor market reforms and unemployment dynamics," CeMMAP working papers CWP13/14, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
  • Handle: RePEc:ifs:cemmap:13/14
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    File URL: http://www.cemmap.ac.uk/wps/cwp131414.pdf
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    References listed on IDEAS

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    Cited by:

    1. Alain Serres & Fabrice Murtin, 2014. "Unemployment at risk: the policy determinants of labour market exposure to economic shocks," Economic Policy, CEPR;CES;MSH, vol. 29(80), pages 603-637, October.
    2. Gehrke, Britta & Weber, Enzo, 2017. "Identifying asymmetric effects of labor market reforms," IAB Discussion Paper 201723, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    3. François Geerolf & Thomas Grjebine, 2014. "Assessing House Price Effects on Unemployment Dynamics," Working Papers 2014-25, CEPII research center.
    4. Murtin, Fabrice & de Serres, Alain & Hijzen, Alexander, 2014. "Unemployment and the coverage extension of collective wage agreements," European Economic Review, Elsevier, vol. 71(C), pages 52-66.

    More about this item

    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
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure

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