What Hides Behind an Unemployment Rate: Comparing Portuguese and U.S. Labor Markets

Olivier Jean Blanchard · Pedro Portugal

545 citations0/0 files storedAmerican Economic Review

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Labor market dynamics and wage inequality Employment, Labor, and Gender Studies Unemployment and Economic Growth

Abstract

Behind similar unemployment rates in the United States and Portugal hide two very different labor markets. Unemployment duration is three times longer in Portugal than in the United States. Symmetrically, flows of workers into unemployment are three times lower in Portugal. These lower flows come in roughly equal proportions from lower job creation and destruction, and from lower worker flows given job creation and destruction. A plausible explanation is high employment protection in Portugal. High employment protection makes economies more sclerotic; but because it affects unemployment duration and worker flows in opposite directions, the effect on unemployment is ambiguous. (JEL E2, J3, J6)

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References

1994Job Creation and Job Destruction in the Theory of Unemployment 1997Unemployment and Labor Market Rigidities: Europe versus North America 2000The Role of Shocks and Institutions in the Rise of European Unemployment: the Aggregate Evidence 1996Job creation and destruction 1990Job Security Provisions and Employment 2005Search-Theoretic Models of the Labor Market: A Survey 1990Job security, employment and wages 1990The Cyclical Behavior of the Gross Flows of U.S. Workers

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