Unemployment and finance: how do financial and labour market factors interact?

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Using annual data for 18 OECD countries over the period 1980-2004, we investigate how labour and financial factors interact to determine unemployment by estimating a dynamic panel model using the system generalized method of moments (GMM). We show that the impact of financial variables depends strongly on the labour market context. Increased market capitalization as well as decreased banking concentration reduce unemployment if the level of labour market regulation, union density and coordination in wage bargaining is low. The above financial variables have no effect otherwise. Increasing intermediated credit and banking concentration is beneficial for employment when the degree of labour market regulation, union density and coordination in wage bargaining is high. These results suggest that the respective virtues of ed and market-based finance are crucially tied to the labour market context. JEL-Code: E24, J23, P17. Terms of use: Documents in

Job insecurity and financial distress

“…the loss of a job, see for example Pagano and Volpin (2008) and Gatti et al (2012)). Access to financial instruments, for example, by allowing risk-averse workers to prolong the search for a new job, may allow them to seek out those jobs where they will be most productive (see Giannetti (2011)).…”

Institutional Complementarity of Poland in Terms of Diversity of Capitalism

“…It is worth noting that in the case of Poland there are relatively weak trade unions (y1) and no excessive role of the stock exchange (x1). Institutional complementarity in such a case could emerge if there were increased market capitalization and low trade union density (Gatti, Rault, Vaubourg 2010). This may indicate that in order to achieve a higher level of institutional complementarity between the labour market and the financial system in Poland there should be further development of the stock exchange (higher market capitalization).…”

“…Interaction between the labour market and the financial system is as follows: increased market capitalization as well as decreased banking concentration reduce unemployment if the level of labour market regulation, union density and coordination in wage bargaining is low (Gatti, Rault, Vaubourg 2010).…”

Stakeholder Protection in Corporate Governance and in the Legal System, the Varieties of Capitalism, and Long Term Unemployment

“…12 As argued in Gatti et al (2009) complementarity extends to the relation between the degree of coordination of the overall financial regime and the degree of labour market regulation, as far as the consequences on the aggregate unemployment rate are concerned. Taking those characteristics into account Amable presents a more articulate classification, distinguishing between five different types of varieties of capitalism, "neo-liberal or market-based capitalism; Continental European capitalism; social-democratic capitalism; 'Mediterranean' capitalism; and Asian capitalism".…”