Quotation Böck, Maximilian, Crespo Cuaresma, Jesus, Glocker, Christian. 2022. Labor Market Institutions, Fiscal Multipliers, and Macroeconomic Volatility.




We study empirically how various labor market institutions – (i) union density, (ii) unemployment benefit remuneration, and (iii) employment protection – shape fiscal multipliers and macroeconomic volatility. Our theoretical model highlights that more stringent labor market institutions attenuate both fiscal spending multipliers and macroeconomic volatility. This is validated empirically by an interacted panel vector autoregressive model estimated for 16 OECD countries. The strongest effects emanate from employment protection, followed by union density. While some labor market institutions mitigate the size or frequency of exogenous shocks, they, however, reinforce their propagation mechanism. The main policy implication is that stringent labor market institutions render cyclical fiscal policies less relevant for macroeconomic stabilization.


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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Working/discussion paper, preprint
Language English
Title Labor Market Institutions, Fiscal Multipliers, and Macroeconomic Volatility
Year 2022
URL https://www.researchgate.net/publication/359893694_Labor_Market_Institutions_Fiscal_Multipliers_and_Macroeconomic_Volatility
JEL C33, E62, J21, J38


Böck, Maximilian (Former researcher)
Crespo Cuaresma, Jesus (Details)
Glocker, Christian (Wirtschaftsforschungsinstitut, Austria)
Department of Economics (Crespo Cuaresma) (Details)
Research areas (ÖSTAT Classification 'Statistik Austria')
5323 Econometrics (Details)
5371 Macroeconomics (Details)
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