Explaining unemployment trends in the Netherlands
October 1999
Article
volume 23, issue 2 pp 161-168.
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In this paper, a small macroeconomic model of the Dutch labour market is estimated. The model is used to detect the causes of the rise in unemployment since the early 70s. In contrast to existing empirical work, we treat labour supply as an endogenous variable. This adjustment appears to have serious consequences for the conclusions drawn. In particular, we show that the detrimental effect of the replacement rate on unemployment has been overestimated in earlier studies. Furthermore, we include contractual working time in the analysis. Our estimates imply that work sharing does reduce unemployment, but at a high cost. Because hourly wages rise in response to reduced working hours, aggregate output is damaged quite strongly.
Keywords
Automatically Extracted Terms
- unemployment
- labour
- effect
- labour supply
- model
- dur / journal
- equation
- supply
- netherland
- employment
- capital stock
- policy
- wage equation
- change
- replacement rate
- nickell
- market
- layard
- labour force participation
- capital
