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Labour market institutions and unemployment revisited

  • Ochsen, Carsten

In this paper the effects of institutional variables on unemployment are reinvestigated for nine OECD countries. The used framework allow for country specific estimates. In this case, the impact of the considered institutional variables on unemployment may differ across countries, not only in absolute terms but also in terms of sign. The main results are the following: First, there are remarkable differences across countries with respect to the estimated effects. Most of the considered variables have at least in one of the considered countries an unexpected effect. Secondly, after a careful examination of the results we identify complex interdependencies between the institutional variables, which bear resemblance to the interaction hypothesis. Thirdly, the estimates with respect to the minimum wage do confirm the theory of monopsonistic labour markets. Fourthly, based on a cross country comparison some evidence is found that some of the considered labour market institutions have a hump-shaped or U-shaped relation to the unemployment rate. All things considered, the results make strong distinctions clear, and the different economies should be extremely cautious to make a copy of the level of a certain labour market institution of the neighbours.

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Paper provided by University of Rostock, Institute of Economics in its series Thuenen-Series of Applied Economic Theory with number 49.

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Date of creation: 2005
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Handle: RePEc:zbw:roswps:49
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  1. Eckhard Hein & Carsten Ochsen, 2003. "Regimes of Interest Rates, Income Shares, Savings and Investment: A Kaleckian Model and Empirical Estimations for some Advanced OECD Economies," Metroeconomica, Wiley Blackwell, vol. 54(4), pages 404-433, November.
  2. Holmlund, B. & Kolm, A.S., 1995. "Progressive Taxation, Wage Setting, and Unemployment , Theory and Swedish Evidence," Papers 1995-15, Uppsala - Working Paper Series.
  3. Nickell, S. & Layard, R., 1997. "Labour Market Institutions and Economic Performance," Papers 23, Centre for Economic Performance & Institute of Economics.
  4. Michèle Belot & Jan C. van Ours, 2004. "Does the recent success of some OECD countries in lowering their unemployment rates lie in the clever design of their labor market reforms?," Oxford Economic Papers, Oxford University Press, vol. 56(4), pages 621-642, October.
  5. Ljungqvist, Lars & Sargent, Thomas J., 1997. "The European Unemployment Dilemma," Working Paper Series 481, Research Institute of Industrial Economics.
  6. Carsten Ochsen, 2009. "On the measurement of mismatch," Applied Economics Letters, Taylor & Francis Journals, vol. 16(4), pages 405-409.
  7. Stephen Nickell, 2003. "Labour Market Institutions and Unemployment in OECD Countries," CESifo DICE Report, Ifo Institute for Economic Research at the University of Munich, vol. 1(2), pages 13-26, October.
  8. Wolfgang Ochel, 2001. "Collective Bargaining Coverage in the OECD from the 1960s to the 1990s," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, vol. 2(4), pages 62-65, 02.
  9. Blanchard, Olivier & Wolfers, Justin, 2000. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," Economic Journal, Royal Economic Society, vol. 110(462), pages C1-33, March.
  10. Belot, Michele & van Ours, Jan C., 2001. "Unemployment and Labor Market Institutions: An Empirical Analysis," Journal of the Japanese and International Economies, Elsevier, vol. 15(4), pages 403-418, December.
  11. Freeman, Richard B., 1998. "War of the models: Which labour market institutions for the 21st century?1," Labour Economics, Elsevier, vol. 5(1), pages 1-24, March.
  12. Ljungqvist, Lars & Sargent, Thomas J, 2002. "The European Employment Experience," CEPR Discussion Papers 3543, C.E.P.R. Discussion Papers.
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