Does the Recent Success of Some OECD Countries in Lowering Their Unemployment Rates Lie in the Clever Design of Their Labour Market Reforms?

48 Pages Posted: 23 Jun 2000

See all articles by Jan C. van Ours

Jan C. van Ours

Tilburg University - Department of Economics; University of Melbourne - Department of Economics

Michèle Belot

University of Oxford - Nuffield College of Medicine

Date Written: April 2000

Abstract

The development of the unemployment rate differs substantially between OECD countries. In recent years some countries experienced a mild increase, other countries had a stable unemployment rate, while there are also "successful" countries in which the unemployment rate decreased a lot. A common feature of the successful countries is that they implemented a comprehensive set of institutional reforms. In this paper we present a theoretical and empirical framework to investigate how unemployment is affected by different labour market institutions (LMI) such as labour taxes, unemployment benefits, employment protection, union bargaining power and (de)centralisation of bargaining. We argue that complementarities between LMI can be exploited to improve labour market performance. In our empirical analysis of annual data over the period 1960-1995 of eighteen OECD countries we show that interactions between LMI are indeed important.

Keywords: OECD, unemployment, institutions, complementarities, reforms

JEL Classification: E24, J68

Suggested Citation

van Ours, Jan C. and Belot, Michèle V. K., Does the Recent Success of Some OECD Countries in Lowering Their Unemployment Rates Lie in the Clever Design of Their Labour Market Reforms? (April 2000). IZA Discussion Paper No. 147. Available at SSRN: https://ssrn.com/abstract=233899

Jan C. Van Ours (Contact Author)

Tilburg University - Department of Economics ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31 13 466 2880 (Phone)
+31 13 466 3042 (Fax)

University of Melbourne - Department of Economics ( email )

Melbourne, 3010
Australia

Michèle V. K. Belot

University of Oxford - Nuffield College of Medicine ( email )

New Road
Oxford, OX1 1NF
United Kingdom

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