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What really drives unemployment? A bayesian approach to determine the impact of institutions on the unemployment rate

Andreas Sachs ()

Economics Bulletin, 2012, vol. 32, issue 1, 1008-1019

Abstract: Labor and product market regulations affect the unemployment rate without a doubt. Econometricians, however, have yet to establish an unequivocal significance of this impact. The bayesian model averaging approach applied in this paper permits to unambiguously identify institutional indicators related to unemployment. For a panel of 17 countries, 24 years, and 19 institutional variables, eight indicators are identified as robust and significant determinants of unemployment, while the remaining eleven indicators are not related to the unemployment rate.

Keywords: Unemployment; Labor Market Institutions; Product Market Institutions; Bayesian Model Averaging; Model Averaging (search for similar items in EconPapers)
JEL-codes: C3 E2 (search for similar items in EconPapers)
Date: 2012-03-27
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