The interplay between labor market rigidity and volatility-growth nexus |
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Authors: | Micha? Brzozowski |
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Institution: | Faculty of Economic Sciences , University of Warsaw , Warsaw, Poland |
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Abstract: | Using a simple innovation‐driven growth model I investigate to what extent labor market regulations underlie the devastating effects of output volatility on long‐run growth trends. Empirical analysis conducted for 154 countries over the 1996–2005 period shows that an increase from low values of the rigidity of employment index strengthens the influence of volatility on growth. This effect weakens with further increases in rigidity. Hence implementation of labor protection legislation is recommended in economies frequently hit by shocks. |
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Keywords: | growth labor market rigidity volatility |
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