Labor Market Reforms and Unemployment Dynamics

Fabrice Murtin (1) , Jean-Marc Robin (2, 3)

1 OCDE - Organisation de Coopération et de Développement Economiques = Organisation for Economic Co-operation and Development
2 ECON - Département d'économie (Sciences Po)
3 Economics department

We quantify the contribution of labor market reforms to unemployment dynamics in nine OECD countries (Australia, France, Germany, Japan, Portugal, Spain, Sweden, UK, US). We estimate a dynamic stochastic search-matching model with heterogeneous workers and aggregate productivity shocks. The heterogeneous-worker mechanism proposed by Robin (2011) explains unemployment volatility by productivity shocks well in all countries. Placement and employment services, UI benefit reduction and product market deregulation are found to be the most prominent policy levers for unemployment reduction. Business cycle shocks and LMPs explain about the same share of unemployment volatility (except for Japan, Portugal and the US).

Keywords: Unemployment dynamics; Turnover; Labor market institutions; Job search; Matching function

Domains: Economics and Finance

Fabrice Murtin, Jean-Marc Robin. Labor Market Reforms and Unemployment Dynamics. Labour Economics, 2018, 50, pp.3 - 19. ⟨10.1016/j.labeco.2016.05.025⟩. ⟨hal-03602693⟩