Fiscal Consolidation in Reformed and Unreformed Labour Markets: A Look at EU Countries
AbstractThis paper estimates the impact of fiscal consolidation on unemployment and job market flows across EU countries using a recent database of consolidation episodes built on the basis of a “narrative” approach (Devries et al., 2011). Results show that the impact of fiscal consolidation on cyclical unemployment is temporary and significant mostly for expenditure measures. As expected, the impact of fiscal policy shocks on job separation rates is much stronger in low-EPL countries, while high-EPL countries suffer from a stronger reduction in the rate at which new jobs are created. Since a reduced job-finding rate corresponds to a longer average duration of unemployment spells, fiscal policy shocks also tend to have a stronger impact on long-term unemployment if EPL is stricter. Results are broadly confirmed when using "top-down" fiscal consolidation measures based on adjusting budgetary data for the cycle.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Policy Papers with number 47.
Length: 34 pages
Date of creation: Oct 2012
Date of revision:
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Other versions of this item:
- Alessandro Turrini, 2012. "Fiscal consolidation in reformed and unreformed labour markets: A look at EU countries," European Economy - Economic Papers 462, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
- J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-11-11 (All new papers)
- NEP-EEC-2012-11-11 (European Economics)
- NEP-EUR-2012-11-11 (Microeconomic European Issues)
- NEP-LAB-2012-11-11 (Labour Economics)
- NEP-MAC-2012-11-11 (Macroeconomics)
- NEP-PBE-2012-11-11 (Public Economics)
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