Institutions and labor reallocation

Giuseppe Bertola, Richard Rogerson

Research output: Contribution to journalArticlepeer-review

177 Scopus citations

Abstract

Despite stringent dismissal restrictions in most European countries, rates of job creation and destruction are remarkably similar across European and North American labor markets. This paper shows that relative-wage compression is conducive to higher employer-initiated job turnover, and argues that wagesetting institutions and job-security provisions differ across countries in ways that are both consistent with rough uniformity of job turnover statistics and readily explained by intuitive theoretical considerations. When viewed as a component of the mix of institutional differences in Europe and North America, European dismissal restrictions are essential to a proper interpretation of both similar patterns in job turnover and marked differences in unemployment flows.

Original languageEnglish (US)
Pages (from-to)1147-1171
Number of pages25
JournalEuropean Economic Review
Volume41
Issue number6
DOIs
StatePublished - Jun 1997
Externally publishedYes

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

Keywords

  • Firing costs
  • Gross job turnover
  • Wage compression

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