Labor Market Reforms on the Unemployment Rate and Wage Payments in Europe

Emma Li-Hsuan Huang and Julia Huang

MPRA Paper from University Library of Munich, Germany

Abstract: In contrast to the existing literature that focuses only on high unemployment driven by labor market regulations, this study emphasizes the impact of labor market regulations on wage payments in 15 European countries over the period 1985 to 2009. Through a simultaneous system of labor demand and supply, we find that the effect of labor market institutions on the behavior of labor demand outweighs the effect on labor suppliers, which pushes up the wage rate and mitigates the unemployment problem. By detailed investigations into all the responses of players in the labor market, it is plausible for policymakers in Europe to figure out the most efficient method for lowering the unemployment rate without hurting wage payments or discouraging labor supply.

Keywords: Unemployment Rate; Wage; Labor Market Regulations; Europe (search for similar items in EconPapers)
JEL-codes: J08 J32 (search for similar items in EconPapers)
Date: 2013-12
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