Unemployment, Shocks and Institutions

Massachusetts Institute Of Technology, Cambridge MA

Investigators

Abstract

This project investigates the sources of the different experiences with regard to unemployment rates of the various countries of Western Europe over the past three decades. Its goal is to extend previous work in three directions: The first is to extend previous reduced form estimation of the relation between unemployment shocks, and institutions, across European countries by looking separately at the effects on flows and on duration and unemployment and on vacancies. The second is to look at the role of collective bargaining and union attitudes in explaining both the general rise and later decline in unemployment as well as differences across European countries. The third is to explore further the role of labor market institutions by looking at the links between institutions, average unemployment duration and the dynamic effects of shocks on unemployment and to characterize the optimal set of labor market institutions in the presence of incomplete insurance and ex-post wage bargaining.