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Labor market reforms and unemployment dynamics

Author

Listed:
  • Fabrice Murtin
  • Jean-Marc Robin
Abstract
In this paper, we quantify the contribution of labor market reforms to unemployment dynamics in nine OECD countries (Australia, France, Germany, Japan, Portugal, Spain,Sweden, the United Kingdom and the United States). We build and estimate a dynamicstochastic search-matching model with heterogeneous workers, where aggregate shocks toproductivity fuel up the cycle, and unanticipated policy interventions shift structural parameters and displace the long-term equilibrium. We show that the heterogeneous-worker mechanism proposed by Robin (2011) to explain unemployment volatility by productivity shocks works well in all countries. The amount of resources injected into placement and employment services, the reduction of UI benefits and product market deregulation stand out as the most prominent policy levers for unemployment reduction. All other LMPs have a significant but lesser impact. We also find that business cycle shocks and LMPs explain about the same share of unemployment volatility (except for Japan, Portugal andthe US).

Suggested Citation

  • Fabrice Murtin & Jean-Marc Robin, 2014. "Labor market reforms and unemployment dynamics," CeMMAP working papers 13/14, Institute for Fiscal Studies.
    • Handle: RePEc:azt:cemmap:13/14
    DOI: 10.1920/wp.cem.2014.1314
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    2. Pignatti Clemente & Van Belle Eva, 2021. "Better together: Active and passive labor market policies in developed and developing economies," IZA Journal of Development and Migration, Sciendo & Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 12(1), pages 1-27, January.
    3. Gehrke, Britta & Weber, Enzo, 2018. "Identifying asymmetric effects of labor market reforms," European Economic Review, Elsevier, vol. 110(C), pages 18-40.
    4. Loreta ISARAJ & Meleq HOXHAJ, 2021. "Macroeconomic factors influencing unemployment in Albania," Romanian Journal of Economics, Institute of National Economy, vol. 53(2(62)), pages 56-67, December.
    5. Murtin, Fabrice & de Serres, Alain & Hijzen, Alexander, 2014. "Unemployment and the coverage extension of collective wage agreements," European Economic Review, Elsevier, vol. 71(C), pages 52-66.
    6. Andrews Dan & Ferrari Irene & Saia Alessandro, 2019. "The Costs of Firm Exit and Labour Market Policies: New Evidence from Europe," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 19(1), pages 1-24, January.
    7. Yann Thommen, 2019. "Réformes structurelles et résilience des marchés du travail en zone euro," Bulletin de l'Observatoire des politiques économiques en Europe, Observatoire des Politiques Économiques en Europe (OPEE), vol. 41(1), pages 21-32, November.
    8. Yann Thommen, 2019. "Réformes structurelles et résilience des marchés du travail en zone euro," Post-Print hal-04048450, HAL.
    9. repec:hal:spmain:info:hdl:2441/2cnlir7arl8aaqa8hvkgkr7mqn is not listed on IDEAS
    10. Yann Thommen, 2019. "Réformes structurelles et résilience des marchés du travail en zone euro," Bulletin de l'Observatoire des politiques économiques en Europe, Observatoire des Politiques Économiques en Europe (OPEE), vol. 41(1), pages 21-32, December.
    11. François Geerolf & Thomas Grjebine, 2014. "Assessing House Price Effects on Unemployment Dynamics," Working Papers 2014-25, CEPII research center.
    12. Bradley, Jake & Kügler, Alice, 2019. "Labor market reforms: An evaluation of the Hartz policies in Germany," European Economic Review, Elsevier, vol. 113(C), pages 108-135.
    13. Chiara Mussida & Luca Zanin, 2020. "Determinants of the Choice of Job Search Channels by the Unemployed Using a Multivariate Probit Model," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 152(1), pages 369-420, November.

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    More about this item

    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
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure

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