Business Cycles, Labour Market Institutions and Unemployment – Further Evidence from OECD Countries

Empirical evidence concerning the reasons for differences in unemployment dynamics within the group of OECD countries is far from being conclusive. Using a sample of 20 OECD countries over the period 1985-2011, we analyse the impact of business cycles and labour market institutions on total unemployment, equilibrium unemployment and cyclical unemployment. Our empirical results confirm the considerations of Blanchard and Wolfers (2000) by showing that institutions indirectly influence the unemployment level by shaping the impact of economic growth. Moreover, we conduct an extensive sensitivity analysis, which confirms the robustness of our regression results. We also empirically examine the variation of unemployment effects, first, between the countries and, second, between different age cohorts. The results show that both within and between-variability are crucial