Unemployment in the OECD

This article examines the course of unemployment in OECD countries during the recent recession. The severity of the recession and the strength of macro policy responses varied from country to country. However, even after correcting for these differences, unemployment experiences were various. Unemployment generally rose by less in those countries which had strict employment protection legislation, as it did in those countries with relatively high collective-bargaining coverage. Various forms of work-sharing also helped some countries to dampen the rise in unemployment. So did increasing the generosity of out-of-work benefit arrangements. The latter finding suggests that search theoretic approaches need to be modified. Institutions do matter and not just in the short run. Hysteresis effects could project their influence into the medium term.