Employment protection in dual labor markets: Any amplification of macroeconomic shocks?

Benjamin Lochner

No 14/2014, FAU Discussion Papers in Economics from Friedrich-Alexander University Erlangen-Nuremberg, Institute for Economics

Abstract: Although labor market duality is a widespread phenomenon in many OECD countries, there is yet no research consent on the effects of duality on labor market dynamics and performance. Against this background, using a New Keynesian model with unemployment, this paper theoretically investigates the importance of labor market duality on labor market volatilities. The new insight is that duality leads to a non-linear reaction of unemployment volatility for both supply and demand shocks. A subsequent empirical panel data analysis confirms the model predictions. Uncovering the non-linearity in unemployment volatility helps reconciling previous divergent research results.

Keywords: Dual Labor Market; Employment Protection; Firing Costs; Unemployment (search for similar items in EconPapers)
JEL-codes: E24 E32 E52 J23 J41 J63 (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-iue, nep-lab, nep-lma and nep-mac
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Citations: View citations in EconPapers (2)

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Journal Article: Employment Protection in Dual Labor Markets: Any Amplification of Macroeconomic Shocks? (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:iwqwdp:142014

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