Is Portugal Really so Arteriosclerotic? Results from a Cross-Country Analysis of Labor Adjustment

37 Pages Posted: 14 Mar 2003

See all articles by John T. Addison

John T. Addison

University of South Carolina - Moore School of Business - Department of Economics; IZA Institute of Labor Economics

Paulino Teixeira

Universidade de Coimbra - Faculdade de Economia; Center for European Economic Research (ZEW)

Date Written: 1999

Abstract

Reputation indexes of employment protection have proven popular constructs in studies of the covariation of labor market institutions and macroeconomic outcomes. Portugal occupies an unenviable rank order in such measures of the stringency of employment protection. We critique this reputation in two ways: first, by offering a modicum of 'corrective' institutional detail on the nature of employment protection in Portugal; and, second, and more substantively, by offering a detailed analysis of the process of labor adjustment in Portugal, benchmarked to other-country experience. The latter exercise - based on a two- and one-stage error correction model - reveals Portugal to have a very high speed of adjustment to deviations from the long-run employment-output equilibrium - a result that is clearly at odds with its allegedly sclerotic labor market. More in accord with received wisdom is the very smooth labor adjustment mechanism characterizing the United Kingdom. The most notable feature of the German results is the deterioration in that country's speed of adjustment in recent years. The Spanish case is distinguished by its erratic path of long-run adjustment.

Suggested Citation

Addison, John T. and Teixeira, Paulino, Is Portugal Really so Arteriosclerotic? Results from a Cross-Country Analysis of Labor Adjustment (1999). ZEW Discussion Paper No. 99-30. Available at SSRN: https://ssrn.com/abstract=376140 or http://dx.doi.org/10.2139/ssrn.376140

John T. Addison

University of South Carolina - Moore School of Business - Department of Economics ( email )

The Francis M. Hipp Building
1705 College Street
Columbia, SC 29208
United States
803-777-7400 (Phone)
803-777-6876 (Fax)

HOME PAGE: http://mooreschool.sc.edu/moore/economics/profiles/addison.htm

IZA Institute of Labor Economics

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

Paulino Teixeira (Contact Author)

Universidade de Coimbra - Faculdade de Economia ( email )

Av. Dias da Silva, 165
Coimbra, 3004-512
Portugal

Center for European Economic Research (ZEW) ( email )

P.O. Box 10 34 43
L 7,1 D-68161 Mannheim
Germany

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