The Equilibrium Rate of Unemployment in Varying Micro - Institutional Settings

A major issue in the current economic debate is related to the striking difference between Europe, Japan and US concerning the level and evolution of unemployment. This paper explores the micro determinants of these observed stylized facts. In a first part, a theoretical framework is presented allowing to address this comparative analysis. The starting point is the definition of different micro-institutional settings encompassing: (i) the structure of the firm; (ii) the system of education or vocational training; (iii) the nature of the labor market. In particular, the notion of "mode of organization" of the firm will be defined. In a second part, a model is proposed which takes up a "radical economics" perspective to analyze the choice made by firms about wage and effort, subject to their "mode of organization". The main results point to the crucial role played by the mode of organization of the firm and the nature of workers' competence as keydeterminants of the different observable levels of the unemployment rate across main developed countries.