IDEAS home Printed from https://ideas.repec.org/p/ecb/ecbwps/2008912.html
   My bibliography  Save this paper

Labour cost and employment across euro area countries and sectors

Author

Listed:
  • Pierluigi, Beatrice
  • Roma, Moreno

Abstract

This paper studies the role of wage moderation and labour and product market regulation for employment creation. To this end, labour demand estimates are presented for the five largest euro area countries at the aggregate level and for three macro sectors: manufacturing, construction and services. Estimates are carried out for individual countries as well as for the pooled group of countries. This paper shows that labour cost moderation generally helps employment creation, notwithstanding the fact that elasticities of employment to labour costs vary across the countries and sectors analysed. It also shows that some key institutional/structural variables add to the explanation of labour demand developments. In particular, in some countries and sectors, our results point to a negative link between employment growth, the unemployment benefit replacement rate and product market regulation. JEL Classification: E24, J23, J30, C22, C23

Suggested Citation

  • Pierluigi, Beatrice & Roma, Moreno, 2008. "Labour cost and employment across euro area countries and sectors," Working Paper Series 912, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:2008912
    Note: 591179
    as

    Download full text from publisher

    File URL: https://www.ecb.europa.eu//pub/pdf/scpwps/ecbwp912.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. 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 1-33, March.
    2. Olivier Blanchard & Francesco Giavazzi, 2003. "Macroeconomic Effects of Regulation and Deregulation in Goods and Labor Markets," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(3), pages 879-907.
    3. repec:eee:labchp:v:1:y:1986:i:c:p:473-522 is not listed on IDEAS
    4. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780199279173, Decembrie.
    5. Franz Hahn, 2004. "Long-run homogeneity of labour demand. Panel evidence from OECD countries," Applied Economics, Taylor & Francis Journals, vol. 36(11), pages 1199-1203.
    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. Daniel S. Hamermesh & Gerard A. Pfann, 1996. "Adjustment Costs in Factor Demand," Journal of Economic Literature, American Economic Association, vol. 34(3), pages 1264-1292, September.
    8. Fagan, Gabriel & Henry, Jérôme & Mestre, Ricardo, 2001. "An area-wide model (AWM) for the euro area," Working Paper Series 42, European Central Bank.
    9. Andrea Bassanini & Romain Duval, 2006. "Employment Patterns in OECD Countries: Reassessing the Role of Policies and Institutions," OECD Social, Employment and Migration Working Papers 35, OECD Publishing.
    10. Mr. Anthony M Annett, 2007. "Lessons from Successful Labor Market Reformers in Europe," IMF Policy Discussion Papers 2007/001, International Monetary Fund.
    11. Julian Morgan, 2001. "Employment security and the demand for labour in Europe," Applied Economics, Taylor & Francis Journals, vol. 33(14), pages 1763-1774.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Beatrice Pierluigi & Jan Bruha & Roberta Serafini, 2014. "Euro area labour markets: Different reaction to shocks?," Journal of Banking and Financial Economics, University of Warsaw, Faculty of Management, vol. 2(2), pages 34-60, November.
    2. Afşin Şahin & Aysit Tansel & M. Hakan Berument, 2015. "Output–Employment Relationship Across Sectors: A Long- Versus Short-Run Perspective," Bulletin of Economic Research, Wiley Blackwell, vol. 67(3), pages 265-288, July.
    3. Antonis Adam & Thomas Moutos, 2014. "Industry-level labour demand elasticities across the Eurozone: will there be any gain after the pain of internal devaluation?," Working Papers 185, Bank of Greece.
    4. Afşin Şahin & Aysit Tansel & M. Hakan Berument, 2015. "Output–Employment Relationship Across Sectors: A Long- Versus Short-Run Perspective," Bulletin of Economic Research, Wiley Blackwell, vol. 67(3), pages 265-288, July.
    5. Horst Feldmann, 2012. "Product Market Regulation and Labor Market Performance around the World," LABOUR, CEIS, vol. 26(3), pages 369-391, September.
    6. Raimund Krumm & Harald Strotmann, 2013. "The impact of regional location factors on job creation, job destruction and employment growth in manufacturing," Review of Regional Research: Jahrbuch für Regionalwissenschaft, Springer;Gesellschaft für Regionalforschung (GfR), vol. 33(1), pages 23-48, February.
    7. Raimund Krumm & Harald Strotmann, 2010. "The Impact of Regional Supply and Demand Conditions on Job Creation and Destruction," IAW Discussion Papers 61, Institut für Angewandte Wirtschaftsforschung (IAW).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Christoph S. Weber, 2020. "The unemployment effect of central bank transparency," Empirical Economics, Springer, vol. 59(6), pages 2947-2975, December.
    2. Tino Berger & Freddy Heylen, 2011. "Differences in Hours Worked in the OECD: Institutions or Fiscal Policies?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43(7), pages 1333-1369, October.
    3. Gilles Mourre, 2006. "Did the pattern of aggregate employment growth change in the euro area in the late 1990s?," Applied Economics, Taylor & Francis Journals, vol. 38(15), pages 1783-1807.
    4. repec:spo:wpecon:info:hdl:2441/6120 is not listed on IDEAS
    5. Feldmann, Horst, 2012. "Banking deregulation around the world, 1970s to 2000s: The impact on unemployment," International Review of Economics & Finance, Elsevier, vol. 24(C), pages 26-42.
    6. Gabriel J. Felbermayr & Mario Larch & Wolfgang Lechthaler, 2013. "Unemployment in an Interdependent World," American Economic Journal: Economic Policy, American Economic Association, vol. 5(1), pages 262-301, February.
    7. Aurélien GAIMON & Vincent LAPEGUE & Paola MONPERRUS-VERONI & Noé N’SEMI & Frédéric REYNÈS & Maël THEULIERE, 2007. "Does the interaction between shocks and institutions solve the OECD unemployment puzzle? a Theoretical and Empirical Appraisal," Documents de Travail de l'OFCE 2007-34, Observatoire Francais des Conjonctures Economiques (OFCE).
    8. Bart Hobijn & Ayşegül Şahin, 2013. "Firms And Flexibility," Economic Inquiry, Western Economic Association International, vol. 51(1), pages 922-940, January.
    9. Doménech, Rafael & Garcí­a, José Ramón, 2008. "Unemployment, taxation and public expenditure in OECD economies," European Journal of Political Economy, Elsevier, vol. 24(1), pages 202-217, March.
    10. Hamza Bennani, 2018. "Media Perception of Fed Chair's Overconfidence and Market Expectations," EconomiX Working Papers 2018-29, University of Paris Nanterre, EconomiX.
    11. Francesco Paolo Mongelli, 2008. "European Economic and Monetary Integration, and the Optimum Currency Area Theory," European Economy - Economic Papers 2008 - 2015 302, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    12. Horst Feldmann, 2010. "Venture Capital Availability and Labor Market Performance in Industrial Countries: Evidence Based on Survey Data," Kyklos, Wiley Blackwell, vol. 63(1), pages 23-54, February.
    13. Aurélien Gaimon & Vincent Lapegue & Paola Veroni & Noé N'Semi & Frédéric Reynés & Maël Theulière, 2007. "Does the interaction between shocks and institutions solve the OECD unemployment puzzle ? A theoretical and empirical appraisal," Working Papers hal-03602950, HAL.
    14. Dosi, G. & Pereira, M.C. & Roventini, A. & Virgillito, M.E., 2017. "When more flexibility yields more fragility: The microfoundations of Keynesian aggregate unemployment," Journal of Economic Dynamics and Control, Elsevier, vol. 81(C), pages 162-186.
    15. Andrea Bassanini & Romain Duval, 2009. "Unemployment, institutions, and reform complementarities: re-assessing the aggregate evidence for OECD countries," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 25(1), pages 40-59, Spring.
    16. repec:hal:wpspec:info:hdl:2441/6120 is not listed on IDEAS
    17. Felbermayr, Gabriel & Prat, Julien & Schmerer, Hans-Jörg, 2011. "Trade and unemployment: What do the data say?," European Economic Review, Elsevier, vol. 55(6), pages 741-758, August.
    18. Felder, Rahel & Bachmann, Ronald, 2016. "Labour Market Transitions, Shocks and Institutions during the Great Recession: A Cross-Country Analysis," VfS Annual Conference 2016 (Augsburg): Demographic Change 145851, Verein für Socialpolitik / German Economic Association.
    19. repec:hal:spmain:info:hdl:2441/6120 is not listed on IDEAS
    20. H Buscher & C Dreger & R Ramos & J Surinach, 2009. "The Impact of Institutions on the Employment Performance in European Labour Markets," Economic Issues Journal Articles, Economic Issues, vol. 14(1), pages 17-34, March.
    21. Alfred Stiglbauer, 2006. "The (New) OECD Jobs Study: Introduction and Assessment," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 3, pages 58-74.
    22. Andrea Bassanini & Romain Duval, 2006. "The Determinants of Unemployment across OECD Countries," Post-Print halshs-00120584, HAL.
    23. Joanna Tyrowicz, 2009. "When Eastern Labour Markets Enter Western Europe CEECs. Labour Market Institutions upon Euro Zone Accession," Working Papers 2009-03, Faculty of Economic Sciences, University of Warsaw.

    More about this item

    Keywords

    labour cost; Labour Demand; panel estimates;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ecb:ecbwps:2008912. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Official Publications (email available below). General contact details of provider: https://edirc.repec.org/data/emieude.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.