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What can changes in structural factors tell us about unemployment in Europe?

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  • Morgan, Julian
  • Mourougane, Annabelle

Abstract

This paper examines the impact of temporal variation in labour market institutions and other structural factors on unemployment in Europe. These include the influence of trade unions, social security benefits, employment security, mismatch between job seekers and vacancies, the minimum wage and factors which drive a wedge between consumer and producer prices. With this aim, a system including a labour demand and a wage equation is estimated in pooled time-series data for the six largest EU countries for the 1980s and 1990s, allowing for country-specific fixed-effects, institutional effects and adjustment terms. Our estimates suggest that changes in regional mismatch, trade union density and the ratio between consumer and producer prices are positively associated with structural unemployment. This result is robust to a wide variety of different specifications of the model, including a larger sample of eight EU countries. No consistent role is found for the other institutional factors. JEL Classification: E24, J30, C33

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Bibliographic Info

Paper provided by European Central Bank in its series Working Paper Series with number 0081.

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Date of creation: Oct 2001
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Handle: RePEc:ecb:ecbwps:20010081

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Keywords: Labour market institutions; panel estimation; structural unemployment;

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References

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  1. Booth, Alison L, 1996. "Firing Costs, Unions and Employment," CEPR Discussion Papers 1347, C.E.P.R. Discussion Papers.
  2. Bentolila, Samuel & Bertola, Giuseppe, 1990. "Firing Costs and Labour Demand: How Bad Is Eurosclerosis?," Review of Economic Studies, Wiley Blackwell, vol. 57(3), pages 381-402, July.
  3. Blanchard, Olivier & Wolfers, Justin, 2000. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," Economic Journal, Royal Economic Society, vol. 110(462), pages C1-33, March.
  4. Alan Manning, 1992. "Wage Bargaining and the Phillips Curve: The Identification and Specification of Aggregate Wage Equations," CEP Discussion Papers dp0062, Centre for Economic Performance, LSE.
  5. Lazear, Edward P, 1990. "Job Security Provisions and Employment," The Quarterly Journal of Economics, MIT Press, vol. 105(3), pages 699-726, August.
  6. Stephen Nickell, 1997. "Unemployment and Labor Market Rigidities: Europe versus North America," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 55-74, Summer.
  7. Boozer, Michael A., 1997. "Econometric Analysis of Panel Data Badi H. Baltagi Wiley, 1995," Econometric Theory, Cambridge University Press, vol. 13(05), pages 747-754, October.
  8. Hofer, Helmut & Pichelmann, Karl, 1999. "Employment and Wage Adjustment in Euroland's Labour Market," Economics Series 76, Institute for Advanced Studies.
  9. Bertola, Giuseppe, 1990. "Job security, employment and wages," European Economic Review, Elsevier, vol. 34(4), pages 851-879, June.
  10. Barrell, Ray & Pain, Nigel, 1999. "Trade restraints and Japanese direct investment flows," European Economic Review, Elsevier, vol. 43(1), pages 29-45, January.
  11. Lindbeck, Assar & Snower, Dennis J, 1986. "Wage Setting, Unemployment, and Insider-Outsider Relations," American Economic Review, American Economic Association, vol. 76(2), pages 235-39, May.
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Cited by:
  1. Karlson, Nils & Box, Marcus & Heshmati, Almas, 2008. "Generality, State Neutrality and Unemployment in the OECD," Ratio Working Papers 124, The Ratio Institute.
  2. Albert van der Horst, 2003. "Structural Estimates of Equilibrium Unemployment in Six OECD Economies," Economics Working Papers 022, European Network of Economic Policy Research Institutes.
  3. Nicolien Schermer, 2005. "The Synchronisation of European Labour Markets: An Analysis Using Aggregate Philips Curves," DNB Working Papers 076, Netherlands Central Bank, Research Department.
  4. Beissinger, Thomas, 2003. "Strukturelle Arbeitslosigkeit in Europa: Eine Bestandsaufnahme," University of Regensburg Working Papers in Business, Economics and Management Information Systems 389, University of Regensburg, Department of Economics.
  5. Francesco Paolo Mongelli, 2008. "European Economic and Monetary Integration, and the Optimum Currency Area Theory," European Economy - Economic Papers 302, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  6. Beissinger, Thomas, 2003. "Strukturelle Arbeitslosigkeit in Europa : eine Bestandsaufnahme (Structural unemployment in Europe * an inventory)," Mitteilungen aus der Arbeitsmarkt- und Berufsforschung, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 36(4), pages 411-427.
  7. repec:iab:iabmit:v:36:i:4:p:411-427 is not listed on IDEAS
  8. Alistair Dieppe & Jerome Henry & Peter Mc Adam, . "Labour market dynamics in the euro area: A model-based sensitivity analysis," Modeling, Computing, and Mastering Complexity 2003 09, Society for Computational Economics.
  9. Ulrich Fritsche & Camille Logeay & Kirsten Lommatzsch & Katja Rietzler & Sabine Stephan & Rudolf Zwiener unter Mitarb. von Cansel Kiziltepe & Christian Proano-Acosta, 2005. "Auswirkungen von länderspezifischen Differenzen in der Lohn-, Preisniveau- und Produktivitätsentwicklung auf Wachstum und Beschäftigung in den Ländern des Euroraums: Endbericht ; Forschungsprojekt," DIW Berlin: Politikberatung kompakt, DIW Berlin, German Institute for Economic Research, volume 8, number pbk8, July.
  10. Wolfgang Pollan, . "Incomes Policies, Expectations and the NAIRU," WIFO Working Papers 433, WIFO.

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