Labor Market Institutions and Unemployment
Labor market institutions such as the minimum wage have ambiguous effects on welfare. On the one hand, these institutions can increase workers incomes and insure them against adverse shocks. On the other hand, they may backfire against the very workers they were trying to protect, in particular by increasing unemployment. In the developed world, Europes generous labor market institutions are often blamed for high unemployment rates relative to the United States. This course will examine whether this claim is supported empirically. In developing countries, labor market institutions could play an important role in protecting poor workers, especially in the context of economic shocks stemming from globalization. This course asks to what extent what we learned from the experience of developed countries applies to the developing world. In particular, we will be exploring whether labor market institutions in developing countries have an adverse impact on employment, with a focus on the Latin American case. The analysis of labor market institutions will concentrate on four fundamental institutional arrangements: firing costs, unemployment insurance, minimum wages, and union coverage and bargaining power.
