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Dismal Employment Growth in EU Countries: The Role of Corporate Balance Sheet Repair and Dual Labor Markets

Author

Listed:
  • Mr. Bas B. Bakker
  • Mr. Li Zeng

Abstract

This paper argues that the large differences among EU countries in post-crisis employment performance are to a large extent driven by the need to adjust corporate balance sheets, which had greatly deteriorated during the boom years in some countries but not in others. To close the large gaps between saving and investment, firms reduced investment and cut costs to boost profits. With much of the cost adjustment falling on firms’ wage bills, employment losses were largest in countries under the most intense pressures to improve corporate profitability and with limited wage flexibility due to labor market duality.

Suggested Citation

  • Mr. Bas B. Bakker & Mr. Li Zeng, 2013. "Dismal Employment Growth in EU Countries: The Role of Corporate Balance Sheet Repair and Dual Labor Markets," IMF Working Papers 2013/179, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2013/179
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    Cited by:

    1. International Monetary Fund, 2014. "Philippines: Selected Issues," IMF Staff Country Reports 2014/246, International Monetary Fund.
    2. Martin Gächter & Martin Geiger & Florentin Glötzl & Helene Schuberth, 2015. "Sectoral Deleveraging in Europe and Its Economic Implications," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 8-23.
    3. Ms. Yuko Hashimoto & Mr. Noriaki Kinoshita, 2016. "The Financial Wealth of Corporations: A First Look at Sectoral Balance Sheet Data," IMF Working Papers 2016/011, International Monetary Fund.
    4. Mr. Bas B. Bakker & Marta Korczak & Mr. Krzysztof Krogulski, 2019. "Unemployment Surges in the EU: The Role of Risk Premium Shocks," IMF Working Papers 2019/056, International Monetary Fund.
    5. Mislav Brkic, 2015. "Labor Market Duality and the Impact of Prolonged Recession on Employment in Croatia," Croatian Economic Survey, The Institute of Economics, Zagreb, vol. 17(1), pages 5-45, June.

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