Working Paper: NBER ID: w7720
Authors: Ricardo J. Caballero; Mohamad L. Hammour
Abstract: A growing body of new research has emphasized the macroeconomic consequences of transactional impediments in factor markets, and their role in the recurrent restructuring requirements of modern economies. We first review the function institutional arrangements play in facilitating transactions and explore the macroeconomic consequences of poor institutions. As an application, we discuss the lessons that can be learnt from observed changes in the nature of unemployment in Europe. We then analyze the effect the institutional environment can have on macroeconomic restructuring. In light of this framework we revisit the question of the relationship between recessions and restructuring activity, and review the recent evidence of reduced restructuring following recessions. We also discuss corroborating evidence from merger waves' in the restructuring of corporate assets.
Keywords: No keywords provided
JEL Codes: E00; G34; J3; J4
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| poor institutional arrangements (O17) | dysfunctional factor markets (P23) |
| dysfunctional factor markets (P23) | economic stagnation and crises (F44) |
| poor institutional arrangements (O17) | economic stagnation and crises (F44) |
| high levels of labor market regulation (J48) | persistently high unemployment (J64) |
| recessions (E32) | reduced restructuring activity (G32) |
| reduced restructuring activity (G32) | hindered creative destruction (O39) |
| merger waves in corporate asset restructuring (G34) | reflection of dynamics (C69) |