Differences in underemployment between the United States and the Netherlands

In this paper the method of cross nation comparison has been applied to analyze wage impacts of labor market institutions. The countries under comparison are the US and the Netherlands. By means of stochastic wage frontier models it has been shown that labor market institutions, in particular, higher unemployment benefits and collective bargaining lead to substantial less underemployment in the Netherlands than in the US. Information channels also play a role, especially in the US, although to a smaller extent.