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Paulo R. Mota
mpaulo@fep.up.pt
https://orcid.org/0000-0001-7028-4545
Paulo R. Mota
School of Economics and Business, University of Porto, Rua Dr. Roberto Frias, 4200-464 Porto , Portugal
Center for Economics and Finance, University of Porto, Portugal
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Center for Economics and Finance, University of Porto, Portugal
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Paulo B. Vasconcelos
https://orcid.org/0000-0002-7132-880X
Paulo B. Vasconcelos
School of Economics and Business, University of Porto, Rua Dr. Roberto Frias, 4200-464 Porto , Portugal
Center of Mathematics, University of Porto, Portugal
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Center of Mathematics, University of Porto, Portugal
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Abstract
This paper analyses the effects of deregulation of employment in an environment of low interest rates and economic uncertainty. For this purpose, we estimate a switching employment equation based on the play model of hysteresis. As a novel feature, the estimation allows for a possible change in the value of the switching parameter after the implementation of labour market reforms. We use Portuguese monthly industrial data spanning from January 2000 to October 2016. Portugal provides a good case study since it is a country where significant measures towards the deregulation of the labour market were applied after the recent financial crisis. The results show that these measures reduced the hysteresis effects in the dynamics of aggregate employment except in the period where uncertainty increased substantially, when the opposite happened.
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Corvinus University of Budapest
Department of Economics
Fővám tér 8 Budapest, H-1093, Hungary
E-mail: judit.kalman@uni-corvinus.hu
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