Panoeconomicus 2012 Volume 59, Issue 4, Pages: 393-419
https://doi.org/10.2298/PAN1204393F
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How do institutions affect structural unemployment in times of crises?
Furceri Davide (International Monetary Fund, USA)
Mourougane Annabelle (Organisation for Economic Co-operation and Development, France)
This paper examines the effect of economic crises on structural unemployment
using an Autoregressive Distributed Lags model and accounting for the role of
institutional settings on an unbalanced panel of 30 OECD economies from 1960
to 2006. We found that downturns have, on average, a significant positive
impact on the level of structural unemployment rate. The maximum impact
varies with the severity of the downturn. Institutions (such as employment
protection legislation, average replacement ratio and product market
regulation) influence both the extent of the initial shock and the adjustment
pattern in the aftermath of an economic downturn.
Keywords: crisis, structural unemployment, institutions, employment protection legislation