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"Labor Market Institutions And The Effect On The Labor Force."

4293 words - 17 pages

Wilson Acevedo ECOB2000 Kevin Foster Term PaperLabor Market Institutions and the Effect on the Labor ForceLabor is defined as a "measure of the work done by human beings." In economics, the labor market seeks to explain or at least to understand some type of functioning relationship between employer (Labor Demand) and employees (Labor Supply). Therefore, the ultimately purpose for labor economics is to look at the suppliers of labor services (workers), the demanders of labor services (employers), and attempts to understand the resulting pattern of wages, employment, and income. The labor market can also be use as one aspect of the overall performance in the economy, which is how well the economy uses its resources. Since an economy's workers are its chief resource, keeping workers employed is one of the main concerns of economic policymakers. There are three important statistics that serve as indicators of economic performance. Labor force is the sum of the employed and unemployed. The employment rate is the percentage of the population with jobs. Finally, the unemployment rate is the percentage of the population who wants to work, but do not have job.For this economic analysis, our attention will be regarding the labor force and how it's is affected by labor market institutions. How will labor market institutions affect the labor force? How will the labor force react to active labor market policies (ALMPs)? How will the Eijfinger-Schaling index also affect the labor force? In this economic analysis, questions like these would not only be faced, but also answered. The structure of the project will be transitory from a complete analysis based on simple regressions to a more complex explanatory model using multiple variables such as Interest rate, productivity, employment rate, and unemployment rate.The data used was the BGHS (Baker, Glyn, Howell, and Schmitt) dataset, which is the most recent from the years of 1960 to 2000. Basically, this is an annual for labor-market institutions and the outcomes for 20 major countries in the Organization for Economic Cooperation and Development (OECD). The underlying source of almost all the data in the dataset is the OECD. So far, the data itself suggests some interesting results, which were expected. For instance, there is an expected negative correlation between the labor force and the real interest rate. On the other hand, there is an expected positive correlation between the labor force and the productivity level. These results represent some of the key points in determine (among other factors) how the labor force react to economics' performance indicators. Furthermore, there will be a deeper analysis and interpretations on these and other results.Literature ReviewIn order to address this question, two sources will be use as reference:"Unemployment and Labor Market Institutions: The Failure of the Empirical Case for Deregulation," by Dean Baker, Andrew Glyn, David Howell, and John Schmitt.The first paper,...

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