Labor-Market Volatility and Financial Development in the Advanced OECD Countries: Does Labor-Market Regulation Matter&quest

Thibault Darcillon

Comparative Economic Studies, 2016, vol. 58, issue 2, 254-278

Abstract: This paper investigates the relationship between financial development and labor-market volatility in 15 OECD countries from 1974 to 2007. I argue that financial development should affect corporate governance and then how firms will determine wages and the number of hours worked, especially for low-skilled workers. First, my results indicate that financial development is associated with higher employment and wage volatility, but with no significant differences across skill levels. Second, using a threshold regression model, I show that the increasing effect of higher financial development on labor-market volatility is larger in countries with more labor-market regulation.

Date: 2016
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