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OECD Employment Outlook ‐ 2006 Edition: Boosting Jobs and Incomes: Reassessing the Role of Policies and Institutions for Labour Market Performance: A Quantitative Analysis

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Did countries that undertook structural reforms fare better than the others in terms of employment and unemployment? How much of the evolution of employment and unemployment in the recent years can be explained by institutional and policy changes? Changes in policies and institutions appear to explain almost two‐thirds of non‐cyclical unemployment changes over the past two decades. Reforms in the tax‐benefit systems and liberalisation of product market regulations unambiguously improve labour market performance. Reforms in these areas appear to be mutually reinforcing, so that the benefit from any particular policy reform tends to be greater the more employment‐friendly the overall policy and institutional framework. Likewise, spending on active labour market programmes can reduce work disincentive effects brought about by generous unemployment benefits. Macro economic conditions also matter for unemployment performance, but their impact is shaped by labour market policies and institutions.

Document Type: Review Article

Publication date: September 1, 2006

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