Aggregate Earnings and Macroeconomic Shocks: The Role of Labour Market Policies and Institutions

Andrea Bassanini

No 6918, IZA Discussion Papers from IZA Network @ LISER

Abstract: I examine the effect of labour market policies and institutions on the transmission of macroeconomic shocks to the labour market, using both aggregate and industry-level annual data for 23 OECD countries, 23 business-sector industries and up to 29 years. I find that high and progressive labour taxes and generous unemployment benefits amplify labour income fluctuations. By contrast, statutory minimum wages reduce the difference in the sensitivity of wages to aggregate shocks between low-wage and high-wage industries. Dismissal regulations are found to mitigate the impact of shocks on both earnings and employment. Moreover, this mitigation effect is greater in industries where firms have a greater propensity to make staffing changes through dismissals.

Keywords: tax wedge; business-cycle; employment fluctuations; EPL; unemployment benefits (search for similar items in EconPapers)
JEL-codes: J21 J31 J60 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2012-10
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: View citations in EconPapers (7)

Published - published in: Review of Economics and Institutions, 2012, 3 (3), Article 1

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Related works:
Journal Article: Aggregate Earnings and Macroeconomic Shocks: the Role of Labour Market Policies and Institutions (2012)
Working Paper: Aggregate Earnings and Macroeconomic Shocks: The Role of Labour Market Policies and Institutions (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp6918

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