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Labour Market Institutions and Unemployment: Does Finance Matter?

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  • Rault, Christophe

    (University of Orléans)

  • Vaubourg, Anne-Gaël

    (University of Orléans)

Abstract

We explore whether finance influences the impact of labour market institutions on unemployment. Using a data set of 18 OECD countries over 1980-2004, we estimate a panel VectorAutoRegressive model. We check whether causalities from labour market variables to unemployment are affected by financial factors. In Belgium, Italy, Australia, Japan and Spain, accounting for financial indicators mitigates the benefits of labour market flexibilization or makes it harmful to employment. In Austria, Canada, Finland and Portugal, it reduces its detrimental impact or makes it beneficial. In Ireland and Netherlands, both effects prevail, depending on the labour market indicator used.

Suggested Citation

  • Rault, Christophe & Vaubourg, Anne-Gaël, 2011. "Labour Market Institutions and Unemployment: Does Finance Matter?," IZA Discussion Papers 5606, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp5606
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    More about this item

    Keywords

    financial factors; labour market; unemployment; institutional interactions; panel VAR;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • P17 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Performance and Prospects

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