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Institutions and Labor Reallocation

  • Giuseppe Bertola
  • Richard Rogerson

Despite stringent dismissal restrictions in most European countries, rates of job creation and destruction are remarkably similar across European and North American labor markets. This paper shows that relative-wage compression is conducive to higher employer-initiated job turnover, and argues that wagesetting institutions and job-security provisions differ across countries in ways that are both consistent with rough uniformity of job turnover statistics and readily explained by intuitive theoretical considerations. When viewed as a component of the mix of institutional differences in Europe and North America, European dismissal restrictions are essential to a proper interpretation of both similar patterns in job turnover and marked differences in unemployment flows.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5828.

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Date of creation: Nov 1996
Date of revision:
Publication status: published as Bertola, Giuseppe & Rogerson, Richard. "Institutions and labor reallocation," European Economic Review, Elsevier, vol. 41(6), pages 1147-1171, June 1997
Handle: RePEc:nbr:nberwo:5828
Note: EFG
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