EMPLOYMENT PROTECTION AND THE NON‐LINEAR RELATIONSHIP BETWEEN THE WAGE‐PRODUCTIVITY GAP AND UNEMPLOYMENT

Antonia López-Villavicencio () and José Ignacio Silva
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Antonia López-Villavicencio: CEPN - Centre d'Economie de l'Université Paris Nord - Université Sorbonne Paris Nord
José Ignacio Silva: UdG - Universitat de Girona = University of Girona

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Abstract: This paper studies the relationship between the wage‐productivity gap and the unemployment rate in OECD countries between 1985 and 2007. In particular, we investigate whether differences in the employment protection across countries affect the link between these two variables. We show that the elasticity of unemployment with respect to the wage‐productivity gap is non‐linear and that it switches from a positive to a negative value with stricter employment legislation. From a theoretical point of view, we argue that this result is related to a set of labor market reforms introduced in many OECD countries, which affected the relative strictness of institutions.

Keywords: matching model; nonlinearities; smooth transition regression model; unemployment; wage-productivity gap; EPL (search for similar items in EconPapers)
Date: 2011-02-11
Note: View the original document on HAL open archive server: https://hal.science/hal-05455691v1
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Published in Scottish Journal of Political Economy, 2011, 58 (2), pp.200-220. ⟨10.1111/j.1467-9485.2011.00543.x⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05455691

DOI: 10.1111/j.1467-9485.2011.00543.x

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