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Labor Market Rigidity and Structural Shocks: An Open-Economy Approach for International Comparisons

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  • Elías Albagli
  • Pablo García
  • Jorge Restrepo

Abstract

We construct performance-based measures of labor market rigidity considering an open economy framework. We derive and estimate an indicator that depends exclusively on the theoretical measure of unions' bargaining power, with which we rank a sample of 18 heterogeneous countries. The indicator is obtained from unemployment persistence to structural shocks identified using a SVAR with longrun restrictions. We find that Korea, Hong Kong, Chile and the US are relatively flexible, while Germany, Sweden, Spain and Colombia are among the most rigid labor markets. Our index shows high correlation with labor market performance and institutional regulation variables, mainly associated to union representation.

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  • Elías Albagli & Pablo García & Jorge Restrepo, 2004. "Labor Market Rigidity and Structural Shocks: An Open-Economy Approach for International Comparisons," Working Papers Central Bank of Chile 263, Central Bank of Chile.
    • Handle: RePEc:chb:bcchwp:263
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    1. Elías Albagli I. & Pablo García S. & Jorge Restrepo L., 2004. "Evaluating Labor Market Flexibility in Chile from an International Perspective," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 7(2), pages 27-46, August.
    2. Camilo Alberto Cárdenas Hurtado & María Alejandra Hernández Montes & Jhon Edwar Torres Gorron, 2015. "A Statistical Analysis of Heterogeneity on Labour Markets and Unemployment Rates in Colombia," Revista Desarrollo y Sociedad, Universidad de los Andes,Facultad de Economía, CEDE, August.
    3. Norman Loayza & Pablo Fajnzylber & César Calderón, 2005. "Economic Growth in Latin America and the Caribbean : Stylized Facts, Explanations, and Forecasts," World Bank Publications - Books, The World Bank Group, number 7315.
    4. Elías Albagli & Pablo García & Jorge E. Restrepo, 2005. "Assessing the Flexibility of the Labor Market in Chile: An International Perspective," Central Banking, Analysis, and Economic Policies Book Series, in: Jorge Restrepo & Andrea Tokman R. & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Series Edi (ed.),Labor Markets and Institutions, edition 1, volume 8, chapter 9, pages 301-328, Central Bank of Chile.
    5. Camilo Alberto Cárdenas Hurtado & María Alejandra Hernández Montes & Jhon Edwar Torres Gorron, 2014. "An Exploratory Analysis of Heterogeneity on Regional Labour Markets and Unemployment Rates in Colombia: An MFACT approach," Borradores de Economia 802, Banco de la Republica de Colombia.
    6. Macarena García & Alberto Naudon, 2012. "Dinámica Laboral en Chile," Working Papers Central Bank of Chile 659, Central Bank of Chile.

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