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 1516, CERS-IE WORKING PAPERS from Institute of Economics, Centre for Economic and Regional Studies

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, benefits, 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 found 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 unemployment benefit replacement ratios and 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: 35 pages
Date: 2015-04
New Economics Papers: this item is included in nep-eec and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://econ.core.hu/file/download/mtdp/MTDP1516.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 500 Can't connect to econ.core.hu:80 (A connection attempt failed because the connected party did not properly respond after a period of time, or established connection failed because connected host has failed to respond.)

Related works:
Working Paper: How does labour market structure affect the response of economies to shocks? (2016)
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:has:discpr:1516

Access Statistics for this paper

More papers in CERS-IE WORKING PAPERS from Institute of Economics, Centre for Economic and Regional Studies Contact information at EDIRC.
Bibliographic data for series maintained by Nora Horvath ( this e-mail address is bad, please contact ).