We focus on the influence of institutional variables on business cycle synchronisation for 20 OECD countries from 1979 to 2003. More precisely, this paper derives measures for similarity of institutions and structural reforms, and investigates direct and delayed reform effects on synchronisation by applying robustness tests to a panel data framework with bilateral data. Our findings indicate a strong instantaneous relationship between both similarity of institutions as well as common structural reforms and business cycle correlation.JEL classification: E32; F42

Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW.Download this ZEW Discussion Paper from our ftp server:ftp://ftp.zew.de/pub/zew-docs/dp/dp10058.pdf Non-technical SummaryLarge differences in the unemployment rates of industrialized countries and the underlying causes of unemployment have been subject of recurring discussion for a long time.Since the early 90's, labor and product market institutions like employment protection legislation, the unemployment benefit system or the labor tax system moved towards the center of attention. However, while theoretical papers provide clear predictions about the impact institutional factors should have on the labor market, empirical contributions disagree as to which factors are of empirical relevance.One major problem is that institutional concepts used in theoretical work like the bargaining power of workers are unobservable in reality. Although a large number of indicators is available, the low number of observations prevents the inclusion of all of them. Empiricists have therefore to decide which indicators to use in order to capture the effect of a specific institutional concept. However, this pre-selection could give rise to model mis-specification and biased results. This paper offers a solution to this problem by using a bayesian model averaging approach. The major advantage of this method is that a large set of institutional indicators can be tested for significance without running into a degrees-of-freedom problem and without requiring to specify one particular model. Rather, information of a large number of models and, particularly, model uncertainty can be taken into account.The results show that eight institutional indicators are significant. Each equation claiming to explain unemployment in industrialized countriesshould include these indicators as explanatory variables. More specifically, the payroll and the consumption tax, the first year and the fourth/fifth year benefits, the barriers to entry and the public ownership, the bargaining coordination, and the employment protection legislation are of importance. I check the robustness and reliability of the results by considering heteroskedasticity and endogeneity. Furthermore, the inclusion of additional control variables and the reduction of the sample by excluding countries or periods do not change the results substantially. Das Wichtigste in Kürze

Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW.Unemployment and labor reallocation in Europe * Jan Hogrefe * * ZEW MannheimAndreas Sachs * * * ZEW MannheimOctober 20, 2014 AbstractWe ask whether sectoral shocks and the subsequent labor reallocation are responsible for unemployment within selected European economies. Our measure of sectoral labor reallocation is adjusted for aggregate influences and the remaining variation is linked to unemployment in country specific dynamic models. For Spain, the ADL-model estimation reveals a significant impact of sectoral reallocation on unemployment that goes beyond usual business cycle patterns. In Italy, there is weaker yet detectable evidence for this mechanism. In Ireland, Portugal and France, no significant influence of sector level shocks on unemployment is found. The results emphasize the potential structural supply side policies have for reducing unemployment in Spain.JEL-Classification: E24, J62, J64

Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW. employees but might harm (young) entrants. Remarkable is especially the significant and very high effect of employment protection for regular jobs on youth unemployment. In addition, the combined effects of powerful unions and a coordinated wage bargaining system are beneficial for older people and detrimental to youth. Finally, the paper establishes significant labor supply effects and effects of the education system on youth and total unemployment.JEL classification: E02, E24, J21, J68