Do labor market institutions matter for business cycles?
Gnocchi, Stefano (Bank of Canada)
Lagerborg, Andresa (European University Institute (Itàlia))
Pappa, Evi (Universitat Autònoma de Barcelona)

Date:	2015
Abstract:	Using panel data of 19 OECD countries observed over 40 years and data on specific labor market reform episodes we conclude that labor market institutions matter for business cycle fluctuations. Spearman partial rank correlations reveal that more flexible institutions are associated with lower business cycle volatility. Turning to the analysis of reform episodes, wage bargaining reforms increase the correlation of the real wage with labor productivity and the volatility of unemployment. Employment protection reforms increase the volatility of employment and decrease the correlation of the real wage with labor productivity. Reforms reducing replacement rates make labor productivity more procyclical.
Grants:	Ministerio de Ciencia e Innovación ECO2009-09847 Agència de Gestió d'Ajuts Universitaris i de Recerca 2009/SGR-00350
Note:	Altres ajuts: This project has been financed by the Fundacion Ramon Areces. Pappa also acknowledges the financial support from the Spanish Ministry of Science and Innovation through Grant ECO2009-09847, the Generalitat de Catalunya through Grant SGR2009-00350, and the Barcelona Graduate School Research Network.
Rights:	Aquest document està subjecte a una llicència d'ús Creative Commons. Es permet la reproducció total o parcial, la distribució, i la comunicació pública de l'obra, sempre que no sigui amb finalitats comercials, i sempre que es reconegui l'autoria de l'obra original. No es permet la creació d'obres derivades.
Language:	Anglès
Document:	Article ; recerca ; Versió acceptada per publicar
Subject:	Labor market institutions ; Business cycles ; Principal component analysis ; Difference-in-difference regressions
Published in:	Journal of economic dynamics & control, Vol. 51 (2015) , p. 299-317, ISSN 0165-1889

DOI: 10.1016/j.jedc.2014.10.005

Postprint 34 p, 631.7 KB

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