On the Importance of the Dual Labour Market for a Country within a Monetary Union

National Bank of Poland Working Paper No. 207

36 Pages Posted: 22 Aug 2015 Last revised: 9 Jul 2016

See all articles by Anna Kosior

Anna Kosior

NBP

Michał Rubaszek

National Bank of Poland; Warsaw School of Economics (SGH)

Kamil Wierus

NBP

Date Written: June 25, 2015

Abstract

The paper investigates whether differences in the popularity of fixed term contacts on the labour market can be a source of divergent dynamics of unemployment among European Monetary Union economies. For that purpose we construct a database of labor market institutions for a group of eleven euro area countries and years 1995-2013 to conduct a series of dynamic panel regressions. We find a robust and significant impact of duality on unemployment dynamics: high duality rate amplifies its responsiveness to output shocks and lowers its persistence. The heterogeneous unemployment developments, in turn, are a challenge for the conduct of common monetary policy. We conclude that improved stability at both the euro area and country level may be obtained by a coordinated shift to ‘single-contract’ that closes the disproportion between temporary and regular contracts.

Keywords: Dual labour market, Monetary Union, Panel Data

JEL Classification: C23, F02, J68

Suggested Citation

Kosior, Anna and Rubaszek, Michal and Wierus, Kamil, On the Importance of the Dual Labour Market for a Country within a Monetary Union (June 25, 2015). National Bank of Poland Working Paper No. 207. Available at SSRN: https://ssrn.com/abstract=2648876 or http://dx.doi.org/10.2139/ssrn.2648876

Anna Kosior (Contact Author)

NBP ( email )

United States

Michal Rubaszek

National Bank of Poland ( email )

00-919 Warsaw
Poland

Warsaw School of Economics (SGH) ( email )

aleja Niepodleglosci 162
PL-Warsaw, 02-554
Poland

Kamil Wierus

NBP ( email )

United States

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