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Labor market reforms and unemployment dynamics

Authors: Fabrice Murtin and Jean-Marc Robin
Date: 11 June 2016
Type: Journal article, Labour Economics,
DOI: 10.1016/j.labeco.2016.05.025


We quantify the contribution of labor market reforms to unemployment dynamics in nine OECD countries (Australia, France, Germany, Japan, Portugal, Spain, Sweden, UK, US). We estimate a dynamic stochastic search-matching model with heterogeneous workers and aggregate productivity shocks. The heterogeneous-worker mechanism proposed by Robin (2011) explains unemployment volatility by productivity shocks well in all countries. Placement and employment services, UI benefit reduction and product market deregulation are found to be the most prominent policy levers for unemployment reduction. Business cycle shocks and LMPs explain about the same share of unemployment volatility (except for Japan, Portugal and the US).

Previous version:
Fabrice Murtin and Jean-Marc Robin March 2014, Labor market reforms and unemployment dynamics, cemmap Working Paper, CWP13/14

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