Unemployment, institutions and reform complementarities: Re-assessing the aggregate evidence for OECD countries

There is no or limited consensus on the quantitative impact of institutions on unemployment, which has led some to question the case for structural reforms. Recent studies suggest also that institutions interact with each other and cannot be analysed in isolation. In this paper, we estimate a standard reduced-form model to explore the institutional determinants of unemployment and assess its robustness using a large battery of robustness checks. We show that, although the impact of each individual policy varies across countries due to policy interactions, the simple linear model can be used to draw inferences for countries with an average mix of institutions. The model is then extended to encompass systemic interactions, in which individual policies interact with the overall institutional framework. We find relatively robust evidence of broad reform complementarities.institutions; aggregate unemployment; reform complementarities

The Determinants of Unemployment across OECD Countries

This paper explores the impact of policies and institutions on unemployment in OECD countries over the past decades. Reduced-form unemployment equations, consistent with standard wage setting/price-setting models, are estimated using cross-country/time-series data from 21 OECD countries over the period 1982-2003. In the “average” OECD country, high and long-lasting unemployment benefits, high tax wedges and stringent anti-competitive product market regulation are found to increase aggregate unemployment. By contrast, highly centralised and/or coordinated wage bargaining systems are estimated to reduce unemployment. These findings are robust across specifications, datasets and econometric methods. The paper also finds evidence of interactions across policies and institutions, as well as between institutions and shocks. Some specific interactions across policies and institutions are found to be particularly robust, notably between unemployment benefits and public spending on active labour market programmes as well as between statutory minimum wages and the tax wedge. Finally, it is shown that macroeconomic conditions also matter for unemployment patterns, with their impact being shaped by policies.unemployment; institutions; shocks

The effects of EMU on structural reforms in labour and product markets

Will EMU accelerate or retard structural reform in labour and product markets? The theoretical literature is ambiguous. New descriptive evidence provided in this paper suggests that euro-area countries have made relatively good progress in structural reform. However, it is much less clear whether progress can be ascribed to EMU membership. To explore further the influence of monetary regime, the paper undertakes an econometric examination of the likelihood that countries undertake reform in five specific areas of labour and product market policies. Based on pooled cross-country/time series Probit regressions covering 21 countries and the period 1985-2003, it is found that structural reform is strengthened by high unemployment, crisis, healthy public finances, reforms in other policy fields and small country size. Further, countries that pursue fixed exchange-rate regimes or participate in monetary union, and therefore have little or no monetary autonomy, appear to undertake less reform – with the effect possibly being concentrated on large countries. JEL Classification: D7, O52EMU, euro, labour market, political economy, product market, reforms

Inertial dynamics of air bubbles crossing a horizontal fluid–fluid interface

The dynamics of isolated air bubbles crossing the horizontal interface separating two Newtonian immiscible liquids initially at rest are studied both experimentally and computationally. High-speed video imaging is used to obtain a detailed evolution of the various interfaces involved in the system. The size of the bubbles and the viscosity contrast between the two liquids are varied by more than one and four orders of magnitude,respectively, making it possible to obtain bubble shapes ranging from spherical to toroidal. A variety of flow regimes isobserved,including that of small bubbles remaining trapped at the fluid–fluid interface in a film-drainage configuration.In most cases, the bubble succeeds in crossing the interface without being stopped near its undisturbed position and, during a certain period of time, tows a significant column of lower fluid which sometimes exhibits a complex dynamics as it lengthens in the upper fluid. Direct numerical simulations of several selected experimental situations are performed with a code employing a volume of-fluid type formulation of the incompressible Navier–Stokes equations. Comparisons between experimental and numerical results confirm the reliability of the computational approach in most situations but also points out the need for improvements to capture some subtle but important physical processes, most notably those related to film drainage. Influence of the physical parameters highlighted by experiments and computations, especially that of the density and viscosity contrasts between the two fluids and of the various interfacial tensions, is discussed and analysed in the light of simple models and available theories

The effects of EMU on structural reforms in labour and product markets

Will EMU accelerate or retard structural reform in labour and product markets? The theoretical literature is ambiguous. New descriptive evidence provided in this paper suggests that euro-area countries have made relatively good progress in structural reform. However, it is much less clear whether progress can be ascribed to EMU membership. To explore further the influence of monetary regime, the paper undertakes an econometric examination of the likelihood that countries undertake reform in five specific areas of labour and product market policies. Based on pooled cross-country/time series Probit regressions covering 21 countries and the period 1985-2003, it is found that structural reform is strengthened by high unemployment, crisis, healthy public finances, reforms in other policy fields and small country size. Further, countries that pursue fixed exchange-rate regimes or participate in monetary union, and therefore have little or no monetary autonomy, appear to undertake less reform – with the effect possibly being concentrated on large countries

What Should We Expect from Innovation? A Model-Based Assessment of the Environmental and Mitigation Cost Implications of Climate-Related R&D

This paper addresses two basic issues related to technological innovation and climate stabilisation objectives: i) Can innovation policies be effective in stabilising greenhouse gas concentrations? ii) To what extent can innovation policies complement carbon pricing (taxes or permit trading) and improve the economic efficiency of a mitigation policy package? To answer these questions, we use an integrated assessment model with multiple externalities and an endogenous representation of technical progress in the energy sector. We evaluate a range of innovation policies, both as a stand-alone instrument and in combination with other mitigation policies. Even under fairly optimistic assumptions about the funding available for, and the returns to R&D, our analysis indicates that innovation policies alone are unlikely to stabilise global concentration and temperature. The efficiency gains of combining innovation and carbon pricing policies are found to reach about 10% for a stabilisation target of 535 ppm CO2eq. However, such gains are reduced when more plausible (sub-optimal) global innovation policy arrangements are considered.Climate Change, Environmental Policy, Energy R&D Fund, Stabilisation Costs

What Should we Expect from Innovation? A Model-Based Assessment of the Environmental and Mitigation Cost Implications of Climate-Related R&D

This paper addresses two basic issues related to technological innovation and climate stabilisation objectives: i) Can innovation policies be effective in stabilising greenhouse gas concentrations? ii) To what extent can innovation policies complement carbon pricing (taxes or permit trading) and improve the economic efficiency of a mitigation policy package? To answer these questions, we use an integrated assessment model with multiple externalities and an endogenous representation of technical progress in the energy sector. We evaluate a range of innovation policies, both as a stand-alone instrument and in combination with other mitigation policies. Even under fairly optimistic assumptions about the funding available for, and the returns to R&D, our analysis indicates that innovation policies alone are unlikely to stabilise global concentration and temperature. The efficiency gains of combining innovation and carbon pricing policies are found to reach about 10% for a stabilisation target of 535 ppm CO2eq. However, such gains are reduced when more plausible (sub-optimal) global innovation policy arrangements are considered.climate change, environmental policy, energy R&D fund, stabilisation costs

Dynamics of air bubbles crossing a horizontal interface

Air bubbles crossing a horizontal interface separating two fluids otherwise at rest are encountered in a wide variety of applications, from iron processing to liquid-liquid extraction and scenarios of nuclear accidents or ascent of plumes in the Earth's man-tle. In this talk we report on some findings obtained during an extensive investigation of that problem involving both experiments and direct numerical simulations. Experimentally, we let a single gas bubble rise by releasing it well below an interface between a lower phase made of water or water plus glycerin and an upper, slightly lighter, phase made of silicon oil. We vary the size of the bubble (typically for 1 mm to 20 mm), and the characteristics of the two fluids in order to explore a broad range of physical conditions. A detailed evolution of the various interfaces is obtained usingnhigh-speed video imaging and image processing techniques. Computations are carried out with two separate codes, both of which solve the full Navier-Stokes equa-tions with an Eulerian approach based on an interface-capturing technique. One of them handles the three-phase nature of the flow through a Volume of Fluid approach without interface reconstruction 3 while the other employs the phase-field formulation based on the Cahn-Hilliard equation. The problem depends on six dimensionless parameters, among which the bubble Archimedes (Ar) and Bond (Bo) numbers and the viscosity ratio [lambda] of the two liquids are those we may vary by several orders of magnitude. A variety of flow regimes and bubble shapes is observed, including that of small bubbles remaining trapped during a very long time below the fluid/fluid interface in a film-drainage configuration. In most cases, the bubble succeeds in crossing the interface without being stopped near its undisturbed position and, during a certain period of time, tows a column or tail of lower fluid which sometimes exhibits a complex dynamics as it lengthens in the upper fluid. Varying Bo, or rather the interfacial Bond number BoI , for fixed values of Ar and [lambda] makes it possible to shed light on the complex role of BoI in the system dy-namics. A simple model is set up to show how BoI in fluences the slowing down of the bubble at the fluid/fluid interface and why increasing it suficiently prevents the bub-ble from remaining trapped below it, leading to a tailing configuration. In contrast, tracking the computed evolution of the film thickness when the bubble stands just below the interface indicates that the larger BoI, the longer the time required to drain the film, in agreement with lubrication-type arguments and previous computational studies performed in the creeping flow limit using boundary integral techniques

How quickly does structural reform pay off? An empirical analysis of the short-term effects of unemployment benefit reform

While there is a fairly broad consensus regarding the potential adverse effects of generous unemployment benefit insurance on steady-state employment, the short-term effects of benefit reforms are not well-established. This paper contributes to fill this gap by estimating impulse responses to benefit reform shocks identified for a panel of OECD countries. Findings indicate that although it takes time for unemployment benefit reforms to pay off, such reforms do not appear to entail any negative short-run effects. There is however some suggestive evidence that reducing unemployment benefits could have negative short-run effects in bad times

The Role of R&D and Technology Diffusion in Climate Change Mitigation: New Perspectives Using the Witch Model

This paper uses the WITCH model, a computable general equilibrium model with endogenous technological change, to explore the impact of various climate policies on energy technology choices and the costs of stabilising greenhouse gas concentrations. Current and future expected carbon prices appear to have powerful effects on R&D spending and clean technology diffusion. Their impact on stabilisation costs depends on the nature of R&D: R&D targeted at incremental energy efficiency improvements has only limited effects, but R&D focused on the emergence of major new low-carbon technologies could lower costs drastically if successful – especially in the non-electricity sector, where such low-carbon options are scarce today. With emissions coming from multiple sources, keeping a wide range of options available matters for stabilisation costs more than improving specific technologies. Due to international knowledge spillovers, stabilisation costs could be further reduced through a complementary, global R&D policy. However, a strong price signal is always required.Climate policy; Energy R&D; Fund; Stabilisation costs