Do labor market institutions matter for business cycles?∗ - European ...

6 CONCLUSIONS 18
6 Conclusions
This paper analyzed whether and how different labor market rigidities affect and in what
way the macroeconomic performance of 19 OECD countries. Our main conclusion is that
labor market reforms have important macroeconomic consequences. Unlike the cross sectional
evidence that are, at best, weak, the analysis of specific reform episodes suggests that
differences in wage bargaining in non-employment benefits and in employment protection
have significant impact on business cycles. These results are robust to the inclusion of a
number of controls in the analysis and hold true when cyclical statistics are computed over
different samples and when prefiltering the data with a variety of methods.
The paper provides some important facts concerning the relationship between labor market
reforms and business cycles. Our conclusions have relevant implications for the most
recent macroeconomic literature. Many authors have suggested, in theory, that labor market
rigidities can explain in part the nature of macroeconomics fluctuations. However, the
empirical evidence in this respect is still limited. This paper shows that indeed labor markets
institutions are important for determining the dynamics of the real wage employment
and unemployment and indicates which ones are the most important for shaping cyclical
fluctuations in the real world.