Unemployment, labour market institutions, fiscal imbalances and credit constraints new evidence on an active debate by Evangelia Papapetrou abd Pinelopi Tsalaporta
By: Papapetrou, Evangelia
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Contributor(s): Tsalaporta, Pinelopi.
Material type: 
ArticlePublisher: 2017Subject(s): DESEMPLEO | MERCADO DE TRABAJO | BALANZAS FISCALES | CREDITO | MODELOS ECONOMETRICOS
In:
The Manchester School v. 85, n. 4, July 2017, p. 466-490Summary: Using the Mortensen and Pissarides model of a labor market with frictions, this paper proposes a new method, simpler than the one presentedin Michaillat (2012), for decomposing unemployment into frictional and non-frictional(rationing) unemployment for a derived rigid wage-setting rule. We use it to compute the frictional and non frictional unemploymentrate for two economies characterized by different labor market institutions, namely the US and the Spanisheconomy. For the entireperiod under study, the US frictional unemployment rate is around 36 per cent of total unemployment, whereas for Spain, approximately 20per cent of all unemployment is due to frictions. This outcome may be explained by the fact that Spain is a country with more labor market rigidities than the US. The empirical results obtained with our method are also consistent with the main result of Michaillat (2012): in both countries, non-frictional unemployment increases in recessions.
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Resumen. Bibliografía.
Using the Mortensen and Pissarides model of a labor market with frictions, this paper proposes a new method, simpler than the one presentedin Michaillat (2012), for decomposing unemployment into frictional and non-frictional(rationing) unemployment for a derived rigid wage-setting rule. We use it to compute the frictional and non frictional unemploymentrate for two economies characterized by different labor market institutions, namely the US and the Spanisheconomy. For the entireperiod under study, the US frictional unemployment rate is around 36 per cent of total unemployment, whereas for Spain, approximately 20per cent of all unemployment is due to frictions. This outcome may be explained by the fact that Spain is a country with more labor market rigidities than the US. The empirical results obtained with our method are also consistent with the main result of Michaillat (2012): in both countries, non-frictional unemployment increases in recessions.
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