Labor Market Policies and IMF Advice in Advanced Economies During the Great Recession

30 Pages Posted: 27 Oct 2013

See all articles by Olivier J. Blanchard

Olivier J. Blanchard

National Bureau of Economic Research (NBER); Peter G. Peterson Institute for International Economics

Florence Jaumotte

International Monetary Fund (IMF)

Prakash Loungani

International Monetary Fund (IMF)

Date Written: March 29, 2013

Abstract

In this paper we present and analyze the IMF‘s labor market recommendations for advanced economies since the beginning of the crisis, both in general and specifically in program countries. Our analysis is informed by our reading of the theoretical and empirical literature on the design of labor market policies and institutions in advanced economies. We organize our discussion around two concepts: micro flexibility, namely the ability of the economy to allow for the reallocation of workers to jobs needed to sustain growth; and macro flexibility, namely the ability of the economy to adjust to macroeconomic shocks. Achieving both types of flexibility while protecting workers and maintaining incentives for workers and firms to invest in existing relations, is not that simple, and the design of labor market institutions faces delicate trade-offs.

Keywords: Unemployment, labor market institutions, Great Recession

JEL Classification: E2, J3, J5, J6

Suggested Citation

Blanchard, Olivier J. and Jaumotte, Florence and Loungani, Prakash, Labor Market Policies and IMF Advice in Advanced Economies During the Great Recession (March 29, 2013). Available at SSRN: https://ssrn.com/abstract=2344550 or http://dx.doi.org/10.2139/ssrn.2344550

Olivier J. Blanchard

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Peter G. Peterson Institute for International Economics ( email )

1750 Massachusetts Avenue, NW
Washington, DC 20036
United States

Florence Jaumotte (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States
202-623-6191 (Phone)

Prakash Loungani

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-7043 (Phone)
202-623-4740 (Fax)

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