Institutions and Labor Reallocation
CEPR Discussion Paper Series No. 1519
Posted: 2 Apr 1997
There are 2 versions of this paper
Institutions and Labor Reallocation
Date Written: November 1996
Abstract
Despite stringent dismissal restrictions in most European countries, rates of job creation and destruction are remarkably similar across European and North American labor markets. This paper shows that relative-wage compression is conducive to higher employer-initiated job turnover and argues that wage-setting institutions and job security provisions differ across countries in ways that are both consistent with rough uniformity of job turnover statistics and readily explained by intuitive theoretical considerations. When viewed as a component of the mix of institutional differences in Europe and North America, European dismissal restrictions are essential to a proper interpretation of both similar patterns in job turnover and marked differences in unemployment flows.
JEL Classification: J31, J63
Suggested Citation: Suggested Citation