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Labor Market Performance in OECD Countries: The Role of Institutional Interdependencies

Andreas Sachs () and Frauke Schleer

EconStor Open Access Articles and Book Chapters, 2019, 431-454

Abstract: Reducing rigidity in labor markets is key to lowering unemployment. Theoretical models suggest that the impact of such reforms depends on the country-specific regulatory framework. We test this hypothesis by estimating the impact of changes in six categories of regulation conditional on the country-specific regulatory environment for 26 OECD countries. We overcome problems of modeling a large set of institutional interdependencies by applying a machine learning type model selection approach. We provide evidence for the existence of higher-order institutional interdependencies. We further document that especially for changes in employment protection and the unemployment benefit system the impact on unemployment is mixed across countries.

Keywords: Labor market regulation; unemployment; institutional interdependencies; model selection; heuristic optimization; machine learning (search for similar items in EconPapers)
JEL-codes: C33 E02 E24 (search for similar items in EconPapers)
Date: 2019
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