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Employment Patterns in OECD Countries: Reassessing the Role of Policies and Institutions


  • Andrea Bassanini
  • Romain Duval


This paper explores the impact of policies and institutions on employment and unemployment of OECD countries in the past decades. Reduced-form unemployment equations, consistent with standard wage setting/pricesetting 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. As policies and institutions affect employment not only via their impact on aggregate unemployment but also through their effects on labour market participation - particularly for those groups “at the margin” of the labour market, group-specific employment rate equations are also estimated. In the “average” OECD country, high unemployment benefits and high tax wedges are found to be associated with lower employment prospects for all groups studied, namely prime-age males, females, older workers and youths. There is also evidence that group-specific policy determinants matter, such as targeted fiscal incentives. Cet article explore l’impact des politiques et des institutions sur l’emploi et le chômage dans les pays de l’OCDE au cours des dernières décennies. Des équations réduites de taux de chômage, telles que dérivées par exemple d’un modèle de négociations salariales, sont estimées sur un panel de 21 pays de l’OCDE sur la période 1982-2003. Il ressort que, dans le pays « moyen » de l'OCDE, le taux moyen de remplacement des indemnités chômage, le coin fiscalo-social et le degré de réglementation des marchés de produits augmentent le taux de chômage structurel. A contrario, il apparaît qu’un haut degré de centralisation/co-ordination des négociations salariales réduit le chômage structurel. Ces résultats sont robustes à des changements de spécification, d’échantillon et de méthode d’estimation économétrique. Étant donné que les politiques et les institutions affectent l’emploi non seulement via leur impact sur le chômage mais aussi au travers de leurs effets sur la participation au marché du travail –en particulier pour les groupes « à la marge » du marché du travail, des équations d’emploi par groupes sont également estimées. Il ressort que dans le pays « moyen » de l’OCDE, le taux de remplacement des indemnités chômage et le coin fiscalo-social réduisent les perspectives d’emplois de chacun des groupes étudiés, à savoir les hommes de 25 à 55 ans, les femmes, les travailleurs âgés et les jeunes. Certains déterminants spécifiques à chaque groupe jouent également un rôle, en particulier les incitations fiscales ciblées.

Suggested Citation

  • Andrea Bassanini & Romain Duval, 2006. "Employment Patterns in OECD Countries: Reassessing the Role of Policies and Institutions," OECD Social, Employment and Migration Working Papers 35, OECD Publishing.
  • Handle: RePEc:oec:elsaab:35-en

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    References listed on IDEAS

    1. Miles Corak & Christine Lietz & Holly Sutherland, 2005. "The Impact of Tax and Transfer Systems on Children in the European Union," Papers inwopa05/30, Innocenti Working Papers.
    2. Virginia Hernanz & Franck Malherbet & Michele Pellizzari, 2004. "Take-Up of Welfare Benefits in OECD Countries: A Review of the Evidence," OECD Social, Employment and Migration Working Papers 17, OECD Publishing.
    3. Gottschalk, Peter & Smeeding, Timothy M., 2000. "Empirical evidence on income inequality in industrialized countries," Handbook of Income Distribution,in: A.B. Atkinson & F. Bourguignon (ed.), Handbook of Income Distribution, edition 1, volume 1, chapter 5, pages 261-307 Elsevier.
    4. Sutherland, Holly, 2001. "EUROMOD: an integrated European benefit-tax model: final report," EUROMOD Working Papers EM9/01, EUROMOD at the Institute for Social and Economic Research.
    5. von Weizsacker, Robert K., 1996. "Distributive implications of an aging society," European Economic Review, Elsevier, vol. 40(3-5), pages 729-746, April.
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    JEL classification:

    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
    • J58 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Public Policy
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy

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