Employment Protection and the Non-Linear Relationship between the Wage-Productivity Gap and Unemployment

21 Pages Posted: 14 Feb 2011

See all articles by Antonia López-Villavicencio

Antonia López-Villavicencio

University of Angers - Centre d'économie de l'Université de Paris Nord (CEPN)

José I. Silva

University of Girona

Date Written: February 11, 2011

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.

Suggested Citation

López-Villavicencio, Antonia and Silva, José I., Employment Protection and the Non-Linear Relationship between the Wage-Productivity Gap and Unemployment (February 11, 2011). Scottish Journal of Political Economy, Vol. 58, No. 2, pp. 200-220, 2011. Available at SSRN: https://ssrn.com/abstract=1760261 or http://dx.doi.org/10.1111/j.1467-9485.2011.00543.x

Antonia López-Villavicencio (Contact Author)

University of Angers - Centre d'économie de l'Université de Paris Nord (CEPN) ( email )

UMR7115
Université Paris-Nord
Paris XIII
France

José I. Silva

University of Girona ( email )

Carrer de la Universitat de Girona, 10
Departament d'Economia
Girona, Girona 17003
Spain

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