Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/49998
Authors: 
Sachs, Andreas
Year of Publication: 
2011
Series/Report no.: 
ZEW Discussion Papers 11-057
Abstract: 
Isolated effects of labor and product market institutions as well as the interaction between both aforementioned categories on unemployment have been extensively discussed in the empirical literature. However, interaction effects between individual labor market institutions have been widely neglected, mainly due to the infeasibility to correctly specify the model. In this paper, a model averaging approach is adopted to show that considering institutional interactions can improve the explanatory power of macroeconomic models explaining unemployment. The approach permits to tackle model specification problems directly related to the inclusion of a large number of interactions. Using a panel data set for 17 OECD countries from 1982 to 2005, 22 robust and significant interactions can be identified. Furthermore, country-specific marginal effects of institutional changes are calculated and their economic significance is analyzed for selected countries.
Subjects: 
Unemployment
Institutions
Labor and Product Markets
Model Averaging
Institutional Interactions
Institutional Design
JEL: 
C33
E02
E24
Document Type: 
Working Paper

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