Abstract
While established estimates of ‘structural’ unemployment are regularly assumed to be a valid proxy for their unobservable theoretical postulate, this paper sets out to study their actual econometric determinants. Based on a data set for 23 OECD countries over the time period 1985–2013, the panel regression results suggest that standard institutional labor market indicators – such as employment protection legislation, trade union density, tax wedge, minimum wages – largely underperform in explaining measures of ‘structural’ unemployment, but macroeconomic factors – in particular capital accumulation, but also the long-term real interest rate – are essential determinants. The available macroeconometric evidence does not support the view that labor market institutions are at the heart of increased ‘structural’ unemployment in OECD economies. To understand the development of unemployment in OECD countries, researchers and policy-makers should primarily consider macroeconomic factors and focus on capital accumulation.
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