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Do Flexible Labor Markets Indeed Reduce Unemployment? A Robustness Check

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  • Robert Vergeer
  • Alfred Kleinknecht

Abstract

Nickell et al . (2005) have frequently been cited as empirical evidence that labor market rigidities cause high unemployment. We find that their model is not robust. Leaving their database unchanged and changing three details in their estimation procedure, it turns out that several policy-relevant coefficients change sign or significance. We conclude that their claim from Non Accelerating Inflation Rate of Unemployment (NAIRU) theory that labor market rigidities cause unemployment is rather shaky. There is a remarkable discrepancy between weak empirical results and sweeping conclusions by policy practitioners with respect to the call for deregulation of labor markets.

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  • Robert Vergeer & Alfred Kleinknecht, 2012. "Do Flexible Labor Markets Indeed Reduce Unemployment? A Robustness Check," Review of Social Economy, Taylor & Francis Journals, vol. 70(4), pages 451-467, December.
    • Handle: RePEc:taf:rsocec:v:70:y:2012:i:4:p:451-467
    DOI: 10.1080/00346764.2012.681113
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    3. Sabina Avdagic & Colin Crouch, 2015. "Symposium Introduction: Labour Market Reforms, Employment Performance, Employment Quality, and Changing Social Risks," British Journal of Industrial Relations, London School of Economics, vol. 53(1), pages 1-5, March.
    4. Brancaccio, Emiliano & Garbellini, Nadia & Giammetti, Raffaele, 2018. "Structural labour market reforms, GDP growth and the functional distribution of income," Structural Change and Economic Dynamics, Elsevier, vol. 44(C), pages 34-45.
    5. Mihai Mutascu & Scott W. Hegerty, 2023. "Predicting the contribution of artificial intelligence to unemployment rates: an artificial neural network approach," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 47(2), pages 400-416, June.
    6. Philipp Heimberger, 2021. "Does employment protection affect unemployment? A meta-analysis," Oxford Economic Papers, Oxford University Press, vol. 73(3), pages 982-1007.
    7. Heimberger, Philipp & Kapeller, Jakob & Schütz, Bernhard, 2017. "The NAIRU determinants: What’s structural about unemployment in Europe?," Journal of Policy Modeling, Elsevier, vol. 39(5), pages 883-908.
    8. Robson Morgan & Kelsey J. O’Connor, 2022. "Labor Market Policy and Subjective Well-Being During the Great Recession," Journal of Happiness Studies, Springer, vol. 23(2), pages 391-422, February.
    9. Gaetano Perone, 2018. "Produttività del lavoro, dinamica salariale e squilibri commerciali nei Paesi dell'Eurozona: un'analisi empirica," Economia & lavoro, Carocci editore, issue 3, pages 61-98.
    10. Hongying Yang & Jin Yu & Ching-Hui (Joan) Su & Ming-Hsiang Chen & Dahui Zhou, 2020. "Can China’s Aging Population Sustain Its Entrepreneurship? Evidence of Nonlinear Effects," Sustainability, MDPI, vol. 12(8), pages 1-14, April.
    11. Franziska Foissner, 2018. "Folgen einer moeglichen Abschaffung der Notstandshilfe in Oberoesterreich," ICAE Working Papers 87, Johannes Kepler University, Institute for Comprehensive Analysis of the Economy.
    12. Armanda Cetrulo & Valeria Cirillo & Dario Guarascio, 2018. "Weaker jobs, weaker innovation. Exploring the temporary employment-product innovation nexus," LEM Papers Series 2018/06, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    13. Robert VERGEER & Alfred KLEINKNECHT, 2014. "Do labour market reforms reduce labour productivity growth? A panel data analysis of 20 OECD countries (1960–2004)," International Labour Review, International Labour Organization, vol. 153(3), pages 365-393, September.
    14. Sabina Avdagic, 2015. "Does Deregulation Work? Reassessing the Unemployment Effects of Employment Protection," British Journal of Industrial Relations, London School of Economics, vol. 53(1), pages 6-26, March.
    15. Servaas Storm, 2019. "Labor Laws and Manufacturing Performance in India: How Priors Trump Evidence and Progress Gets Stalled," Working Papers Series 90, Institute for New Economic Thinking.
    16. Perone, Gaetano, 2024. "The relationship between labor market institutions and innovation in 177 European regions over the period 2000–2015," Structural Change and Economic Dynamics, Elsevier, vol. 70(C), pages 128-149.
    17. Alfred Kleinknecht, 2014. "Schaden Strukturreformen des Arbeitsmarkts der Innovation?," Wirtschaft und Gesellschaft - WuG, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik, vol. 40(3), pages 417-428.
    18. Valeria Cirillo & Marta Fana & Dario Guarascio, 2017. "Labour market reforms in Italy: evaluating the effects of the Jobs Act," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 34(2), pages 211-232, August.
    19. Urbánné Mező, Júlia & Udvari, Beáta, 2016. "Munkapiaci rugalmasság és ifjúsági foglalkoztathatóság [Labour-market flexibility and youth employment]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(4), pages 431-460.

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