Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/58832
Authors: 
Lucifora, Claudio
Moriconi, Simone
Year of Publication: 
2012
Series/Report no.: 
Discussion Paper series, Forschungsinstitut zur Zukunft der Arbeit 6457
Abstract: 
This paper investigates the relationship between political instability and labor market institutions. We develop a theoretical model in which some features of the political process, by reducing the future yields of policy interventions, induce an incumbent government to choose labor market institutions that create wage rents and divert resources from public good provision and social insurance. We test these predictions empirically using panel data for 21 OECD countries for the period 1985-2006. We find strong evidence that political turnover and political polarization - our measures of political instability - are associated with a more regulated labor market, lower unemployment benefit replacement rates, and a smaller tax wedge on labor. We show also that there are strong complementarities between different dimensions of political instability, and evaluate their impact on labour market institutions across countries.
Subjects: 
political instability
labor market institutions
unemployment
JEL: 
J64
J88
H11
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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