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Does the Deregulation of the Labour Market Reduce Employment Hysteresis? An Analysis in a Low Interest Rate Environment

Author

Listed:
  • Paulo R. Mota

    (University of Porto – School of Economics and Business and CEF.UP)

  • Paulo B. Vasconcelos

    (University of Porto – School of Economics and Business and CMUP)

Abstract

This paper analysis the effects of deregulation of the employment in an environment of low interest rates and economic uncertainty. For this purpose, we estimate a switching employment equation based on the play model of hysteresis. As a novel feature, the estimation allows for a possible change in the value of the switching parameter after the application of labour market reforms. We use Portuguese monthly data spanning from January 2000 to October 2016. Portugal provides a good case study since it is a country where significant measures towards the deregulation of the labour market were applied after the recent financial crises. The results show that these measures reduced the hysteresis effects in the dynamics of aggregate employment except in the period where uncertainty increased substantially.

Suggested Citation

  • Paulo R. Mota & Paulo B. Vasconcelos, 2018. "Does the Deregulation of the Labour Market Reduce Employment Hysteresis? An Analysis in a Low Interest Rate Environment," FEP Working Papers 611, Universidade do Porto, Faculdade de Economia do Porto.
    • Handle: RePEc:por:fepwps:611
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    File URL: http://www.fep.up.pt/investigacao/workingpapers/wp611.pdf
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    More about this item

    Keywords

    employment; hysteresis; uncertainty; employment protection legislation;
    All these keywords.

    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
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

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