Comparative Analysis of Labor Market Outcomes: Lessons for the Us from International Long-Run Evidence

79 Pages Posted: 13 Nov 2001

See all articles by Giuseppe Bertola

Giuseppe Bertola

Centre for Economic Policy Research (CEPR); Università di Torino - Dip. di Economia e Statistica

Francine D. Blau

Cornell University - Department of Economics; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute for Economic Research); IZA Institute of Labor Economics; German Institute for Economic Research (DIW Berlin)

Lawrence M. Kahn

Cornell University - School of Industrial and Labor Relations; CESifo (Center for Economic Studies and Ifo Institute for Economic Research); IZA Institute of Labor Economics

Multiple version iconThere are 2 versions of this paper

Date Written: October 2001

Abstract

We analyze a 1960-96 panel of OECD countries to explain why the US has moved from relatively high to relatively low unemployment over the last three decades. We find that while macroeconomic and demographic shocks and changing labor market institutions explain a modest portion of this change, the interaction of these shocks and labor market institutions is the most important factor explaining the shift in US relative unemployment. Our finding of the central importance of these interactions is consistent with Blanchard and Wolfers (2000). We also show that, controlling for country- and time-specific effects, high employment is associated with low wage levels and high levels of wage inequality. These findings suggest that US relative unemployment has fallen in recent years in part because its more flexible labor market institutions allow shocks to affect real and relative wages to a greater degree than is true in other countries. Disaggregating, we find that the employment of both younger and older people fell sharply in other countries relative to the United States since the 1970s, with much smaller differences in outcomes among the prime-aged. In the late 1990s, the US had lower unemployment than our models predict, suggesting exceptionally favorable recent US experience.

Keywords: Wage inequality, demographics

JEL Classification: E00, J50, J60

Suggested Citation

Bertola, Giuseppe and Blau, Francine D. and Kahn, Lawrence M., Comparative Analysis of Labor Market Outcomes: Lessons for the Us from International Long-Run Evidence (October 2001). CEPR Discussion Paper No. 3023. Available at SSRN: https://ssrn.com/abstract=290635

Giuseppe Bertola (Contact Author)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Università di Torino - Dip. di Economia e Statistica ( email )

Lungo Dora Siena 100
Torino, 10153
Italy
+39 011 670 4405 (Phone)

HOME PAGE: http://https://sites.google.com/site/gipbert

Francine D. Blau

Cornell University - Department of Economics ( email )

265 Ives Hall
Ithaca, NY 14853-3901
United States
607-255-4381 (Phone)
607-255-4496 (Fax)

HOME PAGE: http://www.ilr.cornell.edu/directory/fdb4/

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

Lawrence M. Kahn

Cornell University - School of Industrial and Labor Relations ( email )

265 Ives Hall
Ithaca, NY 14853-3901
United States
607-255-0510 (Phone)
607-255-4496 (Fax)

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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