According to the “Krugman Hypothesis”, unemployment increases with the rigidity of la-bor market institutions. Many studies have found this to be true. Nickell et al. (2005) and Sparrman (2011) find that unemployment is increasing in EPL, unemployment bene-fit replacement ratio, while an interaction of the coordination and union density decrease unemployment. It is therefore likely that some of the effect of the institutional variables on the wage differential is picked up in the coefficient of the unemployment rate, because some of the effects of the institutional variables affect the wage dispersion indirectly through unemployment.
The unemployment rate variable in the baseline model is replaced by two variables. One which should account for the indirect effect of labor market institutions on unemployment and the second which should be unaffected by labor market institutions. The new variable for the development in the unemployment rate caused by labor market institutions is based on the estimated coefficients of the institutional variables on the unemployment rate in Sparrman (2011) Table (12). The second variable; the share of unemployment which is assumed not to be correlated with institutional variables consists of the actual unemployment rate subtracted by the predicted unemployment rate.
The compressing effect of labor market institutions on wage inequality are even larger when the effect of labor market institutions through the unemployment rate is accounted for, cf. Table 4. The unemployment rate without labor market institutions has a significant compressing effect on the upper part of the wage distribution, while it significantly increases the lower part of the wage distribution
6 Conclusion
Between 1980 and 2000 most countries in the OECD carried out neo-liberal regulatory re-forms that made labor markets more flexible. These rere-forms included easing of employment protection legislations, lowering of the relative minimum wage, weakening of union power, and some also reduced unemployment benefits. Most of these regulatory changes were as-sociated with lower unemployment rates, but also higher wage disparity, cf. Koeniger et al.
(2007). The Temporary Agency Work Directive in the EU has actualized the effects of labour market institutions as this directive implies more restrictions on employment protection of temporary positions.
The analysis in this paper is based on the empirical specification in Koeniger et al. (2007) but is conducted on a twice as large dataset. The data set covers 20 OECD countries from 1973 to 2011. The results give empirical support to the view that labor market institutions
increases wage inequality. For example, our data set contains all of the Scandinavian coun-tries which traditionally have had small income differences, and our results suggest that the growth in income inequality in the Scandinavian countries would increase by more than 40 percent if their institutions become like the average level of the UK and US. The detailed results show that employment protection legislation, the benefit replacement rate, the un-employment benefit duration, the tax wedge, the minimum wage and the coordination of wage setting all have a significant compressing effect on the 9/1-decile ratio. Union density also has a compressing effect, but it is only significant on the 9/5-decile ratio.
Recently, in Europe, the introduction of the TWA directive has raised a discussion of how regulations on temporary and regularly contracts affect the economy. We replace the overall measure for employment protection in the empirical analysis with variables for temporary and regular contracts, and the results show that these measures have significant opposite effects on wage distribution. Employment protection for temporary contracts has a com-pressing effect on the wage differential, while employment protection for regular contracts has contributed to increasing the wage differential. This implies that easing the restrictions on employment protection for temporary positions in order to stimulate job creation has lead to an increase in wage dispersion. In combination with previous results, which have found that less strict employment protection only increased the share of temporary workers, but did not have any long lasting effects on unemployment, Cahuc and Postel-Vinay (2002) and Blanchard and Landier (2002) may imply a division of the labor market. The separate effects of employment protection for regular and temporary contracts, are interesting in forecasting the effect of Temporary Agency Work Directive in the EU. The new directive does to some extent reverse the features of the neo-liberal labor market reforms that took place in the 80s and 90s, where employment protection concerning temporary positions where deregulated.
The new directive gives employees in temporary contracts and employees working through agencies equal treatment as employees in regular contracts with similar work, and our results suggest that wage inequality will be considerable reduced with this regualtion.
We also extend the analysis in another direction by looking at the effect of immigra-tion. The results show that higher immigration in the lower part of the wage distribution increases wage inequality, but the effect is dampened in countries with minimum wages.
The dampened effect, however, is not significant. The small estimated effects of minimum wages might be due to the fact that minimum wages have been kept at a low level or been decreasing in the estimation period. It would be interesting to look more closely at the effect of institutions on the employment among immigrants. While labor market institutions have a compressing effect on the wages of employed workers, many of the institutional variables have an increasing effect on unemployment for immigrants. Labor market institutions can give immigrants better conditions in the labor market, but at the same time make it harder for immigrants to enter the labor market. This topic is left for the future.
We also perform some robustness checks to our results achieved on the long sample pe-riod. First, theoretical literature has pointed out that labour market institutions also affect unemployment, see Pissarides (2000) and Layard et al. (1991). By using the results in Spar-rman (2011) we predict changes in unemployment caused by labor market institutions, and subtract the predicted effect from actual unemployment. The results show that institutions have an additional effect on the wage differential through the effect on unemployment rate.
In addition, our results and the results in Koeniger et al. (2007) could be due to a common
economic development and hence not be robust to account for cross-sectional dependence.
Our results are tested using methods in Pesaran (2006) and we find that six out of seven labour market institutions still have a compressing impact on inequality. The effect of union density is not significant and the effect of benefit duration has changed sign. While the separate and opposing effects of employment protection of temporary and regular contracts are unaffected by applying this method.
1234512345123451234512345
1960 1980 2000 2020 1960 1980 2000 2020
Australia Austria
Belgium Canada
Denmark Finland
France Germany
Ireland Italy
9/1-Decile Ratio 9/5-Decile Ratio 5/1-Decile Ratio
time
Graphs by c_index
1234512345123451234512345
1960 1980 2000 2020 1960 1980 2000 2020
Japan Netherlands
New Zealand Norway
Portugal Spain
Sweden Switzerland
UK USA
9/1-Decile Ratio 9/5-Decile Ratio 5/1-Decile Ratio
time
Graphs by c_index
Figure 1: Development of Decile Ratios
0 .5 1 1.5 2 Minimum Wage
Union Density Coordination Tax Wedge Benefit duration Benefit Repl. Rate Overall EPL
compared to coefficients in the baseline scenario in table A2
Estimated coefficients on the extended data
Figure 2: The estimated coefficients from Table A and Table 2. The relative size is equal to one if the estimated coefficients from the two tables are equal.
Table 1: Relative standard deviations for the within and between variation. Sample period:
1973-2011
Variable Mean Std. Dev Min Max Rel. Std. Dev Obs
9/1-decile ratio overall 1.07 0.21 0.67 1.64 0.20 N = 465
between 0.20 0.79 1.47 0.19 n = 20
within 0.08 0.81 1.27 0.08 T = 23.25
Employment protection overall 1.21 0.63 0.13 2.51 0.52 N = 798
between 0.62 0.13 2.27 0.51 n = 20
within 0.21 0.51 1.64 0.17 T = 39.9
Benefit replacement ratio overall 0.47 0.20 0.00 0.89 0.42 N = 820
between 0.17 0.23 0.78 0.36 n = 20
within 0.11 -0.05 0.82 0.23 T = 41
Benefit duration overall 0.47 0.33 0.00 1.04 0.69 N = 818
between 0.31 0.00 1.02 0.65 n = 20
within 0.13 -0.23 0.83 0.27 T = 40.9
Tax wedge overall 0.46 0.13 0.19 0.75 0.29 N = 764
between 0.13 0.22 0.67 0.27 n = 20
within 0.05 0.24 0.59 0.10 T = 38.2
Coordination overall 3.21 1.31 1.00 5.00 0.41 N = 753
between 0.99 1.10 4.26 0.31 n = 20
within 0.89 0.55 7.10 0.28 T = 37.65
Union density overall 0.40 0.20 0.08 0.84 0.50 N = 751
between 0.19 0.13 0.78 0.48 n = 20
within 0.08 0.20 0.69 0.19 T = 37.55
Minimum wage overall 0.24 0.25 0.00 0.70 1.07 N = 820
between 0.22 0.00 0.54 0.94 n = 20
within 0.13 -0.30 0.76 0.55 T = 41
log(Unempl. rate) overall 1.69 0.77 -5.81 3.23 0.45 N = 820
between 0.51 0.15 2.41 0.30 n = 20
within 0.58 -4.26 3.04 0.34 T = 41
log(Skill Ratio) overall -1.69 0.75 -3.80 0.07 0.45 N = 763
between 0.62 -2.78 -0.38 0.37 n = 20
within 0.45 -2.86 -0.82 0.26 T = 38.15
log(Skill)*log(Unempl. rate) overall -2.76 1.89 -7.23 12.90 0.69 N = 763
between 1.52 -5.63 0.23 0.55 n = 20
within 1.18 -5.40 9.91 0.43 T = 38.15
Import intensity overall 0.13 0.07 0.01 0.56 0.58 N = 735
between 0.06 0.02 0.30 0.49 n = 20
within 0.04 -0.03 0.38 0.32 T = 36.75
R&D overall 0.05 0.03 0.00 0.16 0.73 N = 649
between 0.03 0.00 0.10 0.65 n = 20
within 0.02 0.01 0.15 0.33 T = 32.45
Table 2: Labour market institutions and wage inequality on the period 1973-2011.
GLS CCEP
(1) (2) (3) (4)
9/1-Decile Ratio 9/5-Decile Ratio 5/1-Decile Ratio 9/1-Decile Ratio Coef./se p-value Coef./se p-value Coef./se p-value Coef./se p-value
Institutional variables: ref. ref. ref. ref.
Employment Protection Legislation(EPL) -0.056∗∗ 0.00 -0.019∗ 0.04 -0.052∗∗∗ 0.00 -0.038∗ 0.04
(0.02) (0.01) (0.01) (0.02)
Benefit Replacement Rate -0.157∗∗∗ 0.00 -0.080∗∗∗ 0.00 -0.114∗∗∗ 0.00 -0.119∗∗ 0.01
(0.04) (0.02) (0.03) (0.05)
Benefit Duration -0.041 0.09 0.008 0.58 -0.031 0.09 0.011 0.70
(0.02) (0.01) (0.02) (0.03)
Tax Wedge -0.431∗∗∗ 0.00 -0.111∗ 0.04 -0.189∗∗ 0.00 -0.207∗ 0.04
(0.09) (0.05) (0.06) (0.10)
Coordination of Wage Setting -0.011∗∗ 0.00 -0.009∗∗∗ 0.00 -0.004 0.08 -0.006∗ 0.02
(0.00) (0.00) (0.00) (0.00)
Union Density -0.119 0.08 -0.153∗∗∗ 0.00 0.017 0.70 -0.015 0.88
(0.07) (0.04) (0.04) (0.10)
Minimum Wage -0.080∗∗∗ 0.00 -0.032∗ 0.02 -0.026 0.10 -0.104∗∗∗ 0.00
(0.02) (0.01) (0.02) (0.02)
Supply and demand conditions: ref. ref. ref. ref.
Ln(Skill Ratio) -0.119∗∗∗ 0.00 -0.010 0.59 -0.130∗∗∗ 0.00 -0.062 0.10
(0.03) (0.02) (0.02) (0.04)
Ln(Unemployment Rate) -0.050∗ 0.03 -0.041∗∗ 0.00 0.008 0.58 -0.026 0.21
(0.02) (0.01) (0.02) (0.02)
Ln(Unemploymentrate)*Ln(Skill Ratio) 0.005 0.74 -0.011 0.17 0.028∗∗ 0.00 0.001 0.97
(0.01) (0.01) (0.01) (0.01)
Trade and Technology: ref. ref. ref. ref.
Import Intensity -0.466∗∗∗ 0.00 -0.221∗∗ 0.00 -0.279∗∗∗ 0.00 0.172 0.32
(0.13) (0.08) (0.06) (0.17)
R&D Intensity -0.972∗∗∗ 0.00 -0.486∗∗∗ 0.00 -0.205 0.14 0.057 0.80
(0.20) (0.11) (0.14) (0.22)
Observations 421 421 424 421
Number of Countries 20 20 20 20
Avg years pr country 21.1 21.1 21.2 21.1
F-test of all the exogenous variables 357.94 (0.00) 252.33 (0.00) 236.03 (0.00) 74.60 (0.00) F-test of institutional variables 96.37 (0.00) 88.42 (0.00) 75.73 (0.00) 58.60 (0.00) F-test of non-institutional variables 168.45 (0.00) 85.50 (0.00) 124.87 (0.00) 23.10 (0.00)
R2 0.94 0.94 0.93 0.61
∗p <0.05,∗∗p <0.01,∗∗∗p <0.001
a) All estimations include dummies for countries and years and assumes country-level heteroscedasticity.
b) Numbers in parenthesis are standard deviations.
Variables:
The Benefit Replacement Ratio, Union Density, Minimum Wage, Import Intensity, R&D Intensity and Tax Wedge are proportions with range (0-1), Benefit Duration has a range (0-1.1) EPL Overall ranges (0-3) and Coordination ranges (1-5).
Tests :
Modified Wald test for groupwise heteroskedasticity in cross-sectional time-series FGLS regression model, H0:σi2=σ2for all i,χ2(20) = 2543174.8 and p-value = 0.
Breush-Pagan testχ2(45) = 149.31 and p-value is equal to = 0.00.
Pesaran’s test of cross sectional independence = -2.99 and p-value equal to 0.00. The average absolute value of the off-diagonal elements = 0.32 Friedman’s test of cross sectional independence = 3.53 and p-value equal to 0.94
Frees’ test of cross sectional independence = .89 and critical value forα= 0.01 is equal to 0.31
Table 3: Quantitative implications of changes in the institutional variables. Change in log(w90/w10)
Panel A EPL Benefit Benefit Tax Coord Union Min Immigration EPL EPL
One Std.dev Change Overall Rep. Rate Duration Wedge Density Wage Temp. Reg.
Coefficients from:
Table 2, Baseline model -0.03 -0.03 -0.01 -0.06 -0.01 -0.03 -0.02
Table 5, EPL temp. and reg. -0.02 0.00 -0.04 -0.01 -0.01 0.00 -0.02 0.01
Table 6, Immigration -0.04 -0.03 -0.02 -0.07 -0.01 -0.04 -0.02 0.02
Panel B
Change from Min to Max Coefficients from:
Table 2, Baseline model -0.11 -0.14 -0.04 -0.23 -0.04 -0.09 -0.05
Table 5, EPL temp. and reg. -0.08 0.01 -0.14 -0.03 -0.02 0.00 -0.07 0.05
Table 6, Immigration -0.14 -0.14 -0.07 -0.27 -0.04 -0.13 -0.06 0.12
Table 4: Indirect effects of labour market institutions via unemployment on wage inequality.
Estimation Period 1973-2011
(1) (2) (3)
9/1-Decile Ratio 9/5-Decile Ratio 5/1-Decile Ratio Coef./se p-value Coef./se p-value Coef./se p-value Institutional variables:
Employment Protection Legislation(EPL) -0.072∗∗∗ 0.00 -0.021∗ 0.03 -0.065∗∗∗ 0.00
(0.02) (0.01) (0.01)
Benefit Replacement Rate -0.263∗∗∗ 0.00 -0.141∗∗∗ 0.00 -0.167∗∗∗ 0.00
(0.05) (0.03) (0.04)
Benefit Duration -0.052 0.06 0.012 0.37 -0.056∗∗ 0.01
(0.03) (0.01) (0.02)
Tax Wedge -0.498∗∗∗ 0.00 -0.092 0.10 -0.275∗∗∗ 0.00
(0.10) (0.05) (0.07)
Coordination of Wage Setting -0.010∗ 0.01 -0.009∗∗∗ 0.00 -0.002 0.49
(0.00) (0.00) (0.00)
Union Density -0.084 0.25 -0.045 0.26 -0.018 0.70
(0.07) (0.04) (0.05)
Minimum Wage -0.066∗∗ 0.00 -0.019 0.14 -0.021 0.20
(0.02) (0.01) (0.02)
Supply and demand conditions:
Ln(Skill Ratio) -0.553∗∗∗ 0.00 -0.605∗∗∗ 0.00 -0.147∗ 0.04
(0.11) (0.06) (0.07)
Ln(Share of UNR caused by LMIs) -0.004 0.95 -0.174∗∗∗ 0.00 0.104∗ 0.02
(0.06) (0.03) (0.04)
Ln(UNR controlled for Effects of LMIs) -0.032 0.17 -0.015 0.22 0.004 0.79
(0.02) (0.01) (0.02)
Ln(Skill)*Ln(UNR by LMIS) -0.084∗∗∗ 0.00 -0.116∗∗∗ 0.00 -0.005 0.69
(0.02) (0.01) (0.01)
Ln(Skill)*Ln(UNR unaff. by LMIs) 0.019 0.16 0.006 0.45 0.026∗∗ 0.01
(0.01) (0.01) (0.01)
Trade and Technology:
Import Intensity -0.445∗∗∗ 0.00 -0.120 0.10 -0.291∗∗∗ 0.00
(0.13) (0.07) (0.06)
R&D Intensity -1.129∗∗∗ 0.00 -0.591∗∗∗ 0.00 -0.302∗ 0.03
(0.21) (0.11) (0.14)
Observations 420 420 423
Number of Countries 20 20 20
Avg years pr country 21.0 21.0 21.1
F-test of all the exogenous variables 424.77 (0.00) 503.39 (0.00) 244.18 (0.00) F-test of institutional variables 101.25 (0.00) 100.24 (0.00) 72.05 (0.00) F-test of non-institutional variables 195.58 (0.00) 258.42 (0.00) 131.56 (0.00)
R2 0.95 0.95 0.93
∗p <0.05,∗∗p <0.01,∗∗∗p <0.001
a) All estimations include dummies for countries and years and assumes country-level heteroscedasticity.
b) Numbers in parenthesis are standard deviations.
Variables:
The Benefit Beplacement Ratio, Union Density, Minimum Wage, Import Intensity, R&D Intensity and Tax Wedge are proportions with range (0-1), Benefit Duration has a range (0-1.1) EPL Overall ranges (0-3) and Coordination ranges (1-5).
Table 5: Labour market institutions, and separate measures of EPL for regular and tempo-rary positions. Estimation Period 1985-2011
(1) (2) (3) (4)
9/1-Decile Ratio 9/5-Decile Ratio 5/1-Decile Ratio 9/1-Decile Ratio Coef./se p-value Coef./se p-value Coef./se p-value Coef./se p-value Institutional variables:
EPL for Regular contracts 0.013 0.62 0.039∗∗ 0.01 0.004 0.79
(0.03) (0.02) (0.01)
EPL for Temporary Contracts -0.013∗ 0.02 -0.005 0.10 -0.016∗∗∗ 0.00
(0.01) (0.00) (0.00)
Benefit Replacement Rate -0.091 0.09 -0.065∗ 0.03 -0.081∗ 0.02 -0.084 0.11
(0.05) (0.03) (0.03) (0.05)
Benefit Duration 0.014 0.67 0.023 0.15 0.006 0.80 0.011 0.73
(0.03) (0.02) (0.02) (0.03)
Tax Wedge -0.256∗ 0.02 -0.145∗ 0.02 0.045 0.56 -0.255∗ 0.02
(0.11) (0.06) (0.08) (0.11)
Coordination of Wage Setting -0.007 0.19 -0.003 0.30 -0.003 0.48 -0.008 0.14
(0.01) (0.00) (0.00) (0.01)
Union Density -0.029 0.77 -0.009 0.88 -0.004 0.95 -0.074 0.40
(0.10) (0.06) (0.06) (0.09)
Minimum Wage -0.007 0.86 0.031 0.14 -0.017 0.52 -0.002 0.97
(0.04) (0.02) (0.03) (0.04)
Supply and demand conditions:
Ln(Skill Ratio) -0.099∗ 0.01 -0.002 0.92 -0.063∗ 0.03 -0.097∗ 0.01
(0.04) (0.03) (0.03) (0.04)
Ln(Unemployment Rate) -0.066∗∗ 0.01 -0.054∗∗∗ 0.00 -0.018 0.33 -0.067∗∗ 0.00
(0.02) (0.02) (0.02) (0.02)
Ln(Unemploymentrate)*Ln(Skill Ratio) -0.020 0.21 -0.025∗ 0.02 0.002 0.83 -0.021 0.17
(0.02) (0.01) (0.01) (0.02)
Trade and Technology:
Import Intensity -0.369∗ 0.01 -0.166∗ 0.04 -0.201∗∗ 0.00 -0.332∗ 0.02
(0.15) (0.08) (0.07) (0.15)
R&D Intensity -1.034∗∗∗ 0.00 -0.416∗∗ 0.01 -0.237 0.19 -1.115∗∗∗ 0.00
(0.27) (0.16) (0.18) (0.26)
EPL Overall -0.044∗ 0.03
(0.02)
Observations 321 321 324 321
Number of Countries 20 20 20 20
Avg years pr country 16.1 16.1 16.2 16.1
F-test of all the exogenous variables 186.72 (0.00) 132.06 (0.00) 84.51 (0.00) 186.81 (0.00) F-test of institutional variables 19.01 (0.01) 32.71 (0.00) 30.16 (0.00) 18.82 (0.01) F-test of non-institutional variables 116.98 (0.00) 61.20 (0.00) 41.60 (0.00) 128.10 (0.00)
R2 0.96 0.95 0.80 0.96
∗p <0.05,∗∗p <0.01,∗∗∗p <0.001
a) All estimations include dummies for countries and years and assumes country-level heteroscedasticity b) Numbers in parenthesis are standard deviations
Variables:
The Benefit Replacement Ratio, Union Density, Minimum Wage, Import Intensity, R&D Intensity and Tax Wedge are proportions with range (0-1),Benefit Duration has a range (0-1.1) EPL for Regular and Temporary Contracts ranges (0-5) and Coordination ranges (1-5).
Table 6: Labour market institutions, immigration, and interaction between minimum wage and immigration on wage inequality. Estimation Period: 1973-2011
(1) (2) (3) (4) (5)
9/1-Decile Ratio 9/5-Decile Ratio 5/1-Decile Ratio 9/1-Decile Ratio 5/1-Decile Ratio Coef./se p-value Coef./se p-value Coef./se p-value Coef./se p-value Coef./se p-value Institutional variables:
Employment Protection Legislation(EPL) -0.070∗∗∗ 0.00 -0.023∗ 0.02 -0.057∗∗∗ 0.00 -0.070∗∗∗ 0.00 -0.057∗∗∗ 0.00
(0.02) (0.01) (0.01) (0.02) (0.01)
Benefit Replacement Rate -0.160∗∗∗ 0.00 -0.081∗∗∗ 0.00 -0.112∗∗∗ 0.00 -0.156∗∗∗ 0.00 -0.111∗∗∗ 0.00
(0.04) (0.02) (0.03) (0.04) (0.03)
Benefit Duration -0.069∗∗ 0.00 0.001 0.97 -0.052∗∗ 0.00 -0.061∗ 0.01 -0.053∗∗ 0.01
(0.02) (0.01) (0.02) (0.03) (0.02)
Tax Wedge -0.493∗∗∗ 0.00 -0.119∗ 0.03 -0.262∗∗∗ 0.00 -0.494∗∗∗ 0.00 -0.270∗∗∗ 0.00
(0.09) (0.05) (0.06) (0.09) (0.06)
Coordination of Wage Setting -0.011∗∗ 0.00 -0.009∗∗∗ 0.00 -0.004 0.08 -0.011∗∗∗ 0.00 -0.004 0.07
(0.00) (0.00) (0.00) (0.00) (0.00)
Union Density -0.174∗∗ 0.01 -0.164∗∗∗ 0.00 -0.001 0.99 -0.150∗ 0.03 0.001 0.98
(0.07) (0.04) (0.04) (0.07) (0.04)
Ln(Unemployment Rate) -0.053∗ 0.02 -0.042∗∗ 0.00 0.006 0.66 -0.050∗ 0.03 0.005 0.75
(0.02) (0.01) (0.01) (0.02) (0.01)
Ln(Unemploymentrate)*Ln(Skill Ratio) -0.002 0.89 -0.013 0.12 0.023∗∗ 0.01 -0.000 1.00 0.022∗ 0.01
(0.01) (0.01) (0.01) (0.01) (0.01)
Trade and Technology:
Import Intensity -0.480∗∗∗ 0.00 -0.216∗∗ 0.00 -0.322∗∗∗ 0.00 -0.487∗∗∗ 0.00 -0.324∗∗∗ 0.00
(0.13) (0.08) (0.06) (0.13) (0.07)
R&D Intensity -0.758∗∗∗ 0.00 -0.461∗∗∗ 0.00 -0.123 0.38 -0.800∗∗∗ 0.00 -0.126 0.38
(0.21) (0.11) (0.14) (0.21) (0.14)
Immigration:
Net Immigration 0.861∗∗∗ 0.00 0.152 0.22 0.665∗∗∗ 0.00 0.684∗ 0.01 0.700∗∗∗ 0.00
(0.21) (0.12) (0.14) (0.27) (0.20)
Immigration if min wage 0.366 0.29 -0.056 0.82
(0.34) (0.24)
Observations 421 421 424 421 424
Number of Countries 20 20 20 20 20
Avg years pr country 21.1 21.1 21.2 21.1 21.2
F-test of all the exogenous variables 387.87 (0.00) 256.30 (0.00) 275.90 (0.00) 388.66 (0.00) 278.34 (0.00) F-test of institutional variables 117.18 (0.00) 91.26 (0.00) 96.10 (0.00) 115.47 (0.00) 87.75 (0.00) F-test of non-institutional variables 191.73 (0.00) 87.18 (0.00) 156.74 (0.00) 192.63 (0.00) 156.21 (0.00)
R2 0.95 0.94 0.93 0.95 0.93
∗p <0.05,∗∗p <0.01,∗∗∗p <0.001
a) All estimations include dummies for countries and years and assumes country-level heteroscedasticity b) Numbers in parenthesis are standard deviations
Variables:
The Benefit Replacement Ratio, Union Density, Minimum Wage, Import Intensity, R&D Intensity, Net Immigration and Tax Wedge are proportions with range (0-1), Benefit Duration has a range (0-1.1) EPL Overall ranges (0-3) and Coordination ranges (1-5)
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A Replication
This section replicates the main findings in Koeniger et al. (2007). The replication is done in several steps: First, the main model in Koeniger et al. (2007) is estimated on revised data but with the old figures for coordination and skill from Koeniger et al. (2007), since these data are no longer available and cannot be updated from the original sources. Secondly, the main model in Koeniger et al. (2007) is estimated on the revised data and new measures of coordination and skill attainments, respectively from Visser (2011) and Barro and Lee (2010). These results are the new baseline scenario, which can be compared with the results of the extended data set in 4. The extended data set contains a longer time period and more
This section replicates the main findings in Koeniger et al. (2007). The replication is done in several steps: First, the main model in Koeniger et al. (2007) is estimated on revised data but with the old figures for coordination and skill from Koeniger et al. (2007), since these data are no longer available and cannot be updated from the original sources. Secondly, the main model in Koeniger et al. (2007) is estimated on the revised data and new measures of coordination and skill attainments, respectively from Visser (2011) and Barro and Lee (2010). These results are the new baseline scenario, which can be compared with the results of the extended data set in 4. The extended data set contains a longer time period and more