On the importance of the dual labour market for a country within a monetary union

Anna Kosior, Michał Rubaszek and Kamil Wierus

No 207, NBP Working Papers from Narodowy Bank Polski

Abstract: The paper investigates whether differences in the popularity of fixed term contacts on the labour market can be a source of divergent dynamics of unemployment among European Monetary Union economies. For that purpose we construct a database of labor market institutions for a group of eleven euro area countries and years 1995-2013 to conduct a series of dynamic panel regressions. We find a robust and significant impact of duality on unemployment dynamics: high duality rate amplifies its responsiveness to output shocks and lowers its persistence. The heterogeneous unemployment developments, in turn, are a challenge for the conduct of common monetary policy. We conclude that improved stability at both the euro area and country level may be obtained by a coordinated shift to ‘single-contract’ that closes the disproportion between temporary and regular contracts.

Keywords: Dual labour market; Monetary Union; Panel Data (search for similar items in EconPapers)
JEL-codes: C23 F02 J68 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-eec, nep-iue, nep-lab, nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:nbp:nbpmis:207

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