Labor Market Reforms on the Unemployment Rate and Wage Payments in Europe

Huang, Emma Li-Hsuan and Huang, Julia Hsin-Yi (2013): Labor Market Reforms on the Unemployment Rate and Wage Payments in Europe. Published in: The Empirical Economics Letters , Vol. 12, No. 12 (December 2013)

Abstract

In contrast to the existing literature that focuses only on high unemployment driven by labor market regulations, this study emphasizes the impact of labor market regulations on wage payments in 15 European countries over the period 1985 to 2009. Through a simultaneous system of labor demand and supply, we find that the effect of labor market institutions on the behavior of labor demand outweighs the effect on labor suppliers, which pushes up the wage rate and mitigates the unemployment problem. By detailed investigations into all the responses of players in the labor market, it is plausible for policymakers in Europe to figure out the most efficient method for lowering the unemployment rate without hurting wage payments or discouraging labor supply.

• Item Type: MPRA Paper
• Language: English
• Keywords: Unemployment Rate, Wage, Labor Market Regulations, Europe
• Subjects: J - Labor and Demographic Economics > J0 - General > J08 - Labor Economics Policies; J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J32 - Nonwage Labor Costs and Benefits ; Retirement Plans ; Private Pensions

References

Acemoglu, D. and Autor, D., 2011, Skills, Tasks and Technologies: Implications for Employment and Earnings, Handbook of Labor Economics, edited by Orley Ashenfelter and David Card 4B, 1043-1171.

Acemoglu, D., 1998, Why Do New Technologies Complement Skills? Directed Technical Change and Wage Inequality, The Quarterly Journal of Economics, 113, 1055-1089.

Acemoglu, D., 2002, Technical Change, Inequality, and the Labor Market, Journal of Economic Literature, 40, 7-72.

Blanchard, O. and Wolfers, J., 2000, The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence, Economic Journal, 110, l-33.

Berman, Eli, Bound, J. and Machin, S., 1998, Implications of Skill-Biased Technological Change: International Evidence, The Quarterly Journal of Economics, 113, 1245-1279.

Bartel, A. P. and Sicherman, N., 1999, Technological Change and Wages: An Interindustry Analysis, Journal of Political Economy, 107, 285-325.

DiTella, R. and MacCulloch, R., 2002, The Determination of Unemployment Benefits, Journal of Labor Economics, 20, 404-434.

DiTella, R. and MacCulloch, R., 2005, The Consequences of Labor Market Flexibility: Panel Evidence Based on Survey Data, European Economic Review, 49, 1225-1259.

Kogel, T., 2004, Did the Association Between Fertility and Female Employment within OECD Countries Really Change Its Sign?, Journal of Population Economics, 17, 45-65.

Machin, S. and van Reenen, J. M., 1998, Technology and Changes in Skill Structural: Evidence from Seven OECD countries, The Quarterly Journal of Economics, 113, 1215-1244.

Machin, S., 1997, The Decline of Labor Market Institutions Rise in Wage Inequality in Britain and the Rise in Wage Inequality in Britain, European Economic Review, 41, 647-657.

Moore, M. P. and Ranjan, P., 2005, Globalisation vs Skill-Biased Technological Change: Implications for Unemployment and Wage Inequality, The Economic Journal, 115, 391-422.

Mortensen, D. T. and Pissarides, C. A., 1999, Unemployment Responses to „Skill-Biased‟ Technology Shocks: The Role of Labor Market Policy, Economic Journal, 109, 242-265.

Nickell, S., 1997, Unemployment and Labor Market Rigidities: Europe versus North America, Journal of Economic Perspectives, 11, 55-74.

Nickell, S., 1998, Unemployment: Questions and Some Answers”, Economic Journal, 108, 802-816.

Nickell, S., 2003, A Picture of European Unemployment: Success and Failure, CEP Discussion Papers No. 502.

Nickell, S., Nunziata, L. and Ochel, W., 2005, Unemployment in the OECD since the 1960s. What Do We Know?, Economic Journal, 115, 1-27.

Romero-Avila, D. and Usabiaga, C., 2009, The Unemployment Paradigms Revisited: A Comparative Analysis of U.S. and European Unemployment, Contemporary Economic Policy 27, 321-334.

Saint-Paul, G., 2004, Why are European Countries Diverging in their Unemployment Experience? Journal of Economic Perspectives, 18, 49-68.

Siebert, H., 1997, Labor Market Rigidities: At the Root of Unemployment in Europe, Journal of Economic Perspectives, 11, 37-54.

Van Reenen, J. 2011, Wage Inequality, Technology and Trade: 21st Century Evidence, Labor Economics, 18, 730-741.