EconPapers    
Economics at your fingertips  
 

How does labour market structure affect the response of economies to shocks?

Aurelijus Dabusinskas (), István Kónya and Stephen Millard
Additional contact information
Aurelijus Dabusinskas: Lietuvos Bankas

No 582, Bank of England working papers from Bank of England

Abstract: The recent crisis in the Eurozone has led to much discussion about the structure of labour markets in different Eurozone economies. In particular, there has been much talk of the need for structural labour market reform in the Eurozone periphery. But, there are many aspects of labour market structure – eg, wage flexibility, flexibility in hiring and firing, generosity of welfare schemes, etc — and it is not clear a priori which aspects really matter. In this paper, we analyse how cross-country differences in labour market characteristics — in particular, wage and employment rigidities — shape the response of different countries to a variety of macroeconomic shocks. To address this question, we use a calibrated small open economy model in which we set the parameters governing the structural characteristics of the labour market based on three European countries: Estonia, Finland and Spain. We find that, given our labour market calibrations, we would expect output and unemployment to be much more adversely affected by the shocks associated with the financial crisis in countries with high job turnover rates.

Keywords: Labour market structure; labour market flexibility (search for similar items in EconPapers)
JEL-codes: E24 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2016-01-22
New Economics Papers: this item is included in nep-dge, nep-eec and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.bankofengland.co.uk/-/media/boe/files/ ... 635BECB8DC8E0D1A5F81 Full text (application/pdf)

Related works:
Working Paper: How does labour market structure affect the response of economies to shocks? (2015) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:0582

Access Statistics for this paper

More papers in Bank of England working papers from Bank of England Bank of England, Threadneedle Street, London, EC2R 8AH. Contact information at EDIRC.
Bibliographic data for series maintained by Digital Media Team ().

 
Page updated 2025-03-30
Handle: RePEc:boe:boeewp:0582