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Did the pattern of aggregate employment growth change in the Euro area in the late 1990s?

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  • Gilles Mourre

Abstract

The paper examines whether the pattern of growth in euro area employment seen in the period 1997-2001 differed from that recorded in the past and what could be the reasons for that. First, a standard employment equation is estimated for the euro area as a whole. This shows that the lagged impact of both output growth and real labour cost growth, together with a productivity trend and employment “inertia”, can account for most of the employment developments between 1970 and the early 1990s. Conversely, these traditional determinants can only explain part of the employment development seen in recent years (1997-2001). Second, the paper shows sound evidence of a structural break in the aggregate employment equation in the late 1990s. Third, the paper provides some tentative explanations for this change in aggregate employment developments, using in particular country panels of institutional variables and of active labour market policies but also cross-sectional analyses. Among the relevant factors likely to have contributed to rising aggregate employment in recent years are changes in the sectoral composition of euro area employment, the strong development of part-time jobs, lower labour tax rates and possibly less stringent employment protection legislation and greater subsidies to private employment. JEL Classification: C2, E24, H50, J23

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Bibliographic Info

Paper provided by ULB -- Universite Libre de Bruxelles in its series ULB Institutional Repository with number 2013/14299.

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Date of creation: 2006
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Publication status: Published in: Applied Economics (2006) v.38,p.1783-1807
Handle: RePEc:ulb:ulbeco:2013/14299

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  1. Marimon, Ramon & Zilibotti, Fabrizio, 1996. "'Actual' versus 'Virtual' Employment in Europe: Is Spain Different?," CEPR Discussion Papers 1427, C.E.P.R. Discussion Papers.
  2. Olivier Blanchard & Justin Wolfers, 1999. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," NBER Working Papers 7282, National Bureau of Economic Research, Inc.
  3. Bentolila, Samuel & Bertola, Giuseppe, 1990. "Firing Costs and Labour Demand: How Bad Is Eurosclerosis?," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 57(3), pages 381-402, July.
  4. Francesco Daveri & Guido Tabellini, . "Unemployment, Growth and Taxation in Industrial Countries," Working Papers 122, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  5. Belot, M.V.K. & Ours, J.C. van, 2000. "Does the Recent Success of some OECD Countries in Lowering their Unemployment Rates lie in the Clever Design of their Labour Market Reforms?," Discussion Paper, Tilburg University, Center for Economic Research 2000-40, Tilburg University, Center for Economic Research.
  6. Caballero, Ricardo J. & Hammour, Mohamad L., 1998. "Jobless growth: appropriability, factor substitution, and unemployment," Carnegie-Rochester Conference Series on Public Policy, Elsevier, Elsevier, vol. 48(1), pages 51-94, June.
  7. 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.
  8. Layard, Richard & Nickell, Stephen & Jackman, Richard, 1991. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780198284345, October.
  9. Bertola, Giuseppe, 1992. "Labor Turnover Costs and Average Labor Demand," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 10(4), pages 389-411, October.
  10. Sanders Korenman & David Neumark, 2000. "Cohort Crowding and Youth Labor Markets (A Cross-National Analysis)," NBER Chapters, in: Youth Employment and Joblessness in Advanced Countries, pages 57-106 National Bureau of Economic Research, Inc.
  11. Giuseppe Bertola & Francine D. Blau & Lawrence M. Kahn, 2001. "Comparative Analysis of Labor Market Outcomes: Lessons for the US from International Long-Run Evidence," NBER Working Papers 8526, National Bureau of Economic Research, Inc.
  12. Julian Morgan, 2001. "Employment security and the demand for labour in Europe," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 33(14), pages 1763-1774.
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Cited by:
  1. Alfonso Arpaia & Gilles Mourre, 2009. "Institutions and Performance in European Labour Markets: Taking a Fresh Look at Evidence," Working Papers CEB 09-049.RS, ULB -- Universite Libre de Bruxelles.
  2. Davide Furceri, 2012. "Unemployment and Labor Market Issues in Algeria," IMF Working Papers 12/99, International Monetary Fund.
  3. Cristiano Perugini, 2008. "Employment Intensity of Growth in Italy A Note Using Regional Data," Quaderni del Dipartimento di Economia, Finanza e Statistica, Università di Perugia, Dipartimento Economia, Finanza e Statistica 55/2008, Università di Perugia, Dipartimento Economia, Finanza e Statistica.
  4. Emilia Herman, 2011. "The Impact of Economic Growth Process on Employment in European Union Countries," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 14(42), pages 47-67, December.
  5. Catherine SMITH, 2014. "Did the Intergenerational Solidarity Pact increase the employment rate of the elderly in Belgium? A macro-econometric evaluation," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2014009, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  6. Herwartz, Helmut & Niebuhr, Annekatrin, 2011. "Regional labor demand and national labor market institutions in the EU15," HWWI Research Papers 112, Hamburg Institute of International Economics (HWWI).
  7. Patrick Lenain, 2005. "Is Europe Reforming? Evidence from Cross-Country Structural Indicators," CASE Network Studies and Analyses, CASE-Center for Social and Economic Research 0297, CASE-Center for Social and Economic Research.
  8. Liana Son & Gratiela Georgiana Carica, 2011. "Labour Market Policies in Selected EU Member States: A Comparative and Impact Analysis," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 14(39), pages 151-173, March.
  9. Pattanaik, Falguni & Nayak, Narayan Chandra, 2013. "Employment Intensity Of Secondary Sector In India: Trends, Patterns And Determinants," Journal of Regional Development and Planning, JRDP, vol. 2(2), pages 157-174.
  10. Altavilla, Carlo & Caroleo, Floro Ernesto, 2009. "Unintended Effects of National-based Active Labour Market Policies," IZA Discussion Papers 4045, Institute for the Study of Labor (IZA).
  11. Jochen Hartwig, 2014. "Testing Okun’s law with Swiss industry data," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 46(29), pages 3581-3590, October.
  12. Roberta Serafini & J. Bruha & B. Pierluigi, 2011. "Euro area labour markets: different reaction to shocks?," EcoMod2011 2970, EcoMod.
  13. Klump, Rainer & McAdam, Peter & Willman, Alpo, 2008. "Unwrapping some euro area growth puzzles: Factor substitution, productivity and unemployment," Journal of Macroeconomics, Elsevier, vol. 30(2), pages 645-666, June.
  14. Laura Turner & Hervé Boulhol, 2010. "Recent trends and structural breaks in US and EU15 labour productivity growth," PSE - G-MOND WORKING PAPERS halshs-00963134, HAL.
  15. Hielke Buddelmeyer & Gilles Mourre & Melanie Ward, 2004. "The determinants of part-time work in EU countries: empirical investigations with macro-panel data - Hielke Buddelmeyer, Gilles Mourre and Melanie Ward," European Economy - Economic Papers, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission 213, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  16. Davide Furceri & Ernesto Crivelli & Joël Toujas-Bernate, 2012. "Can Policies Affect Employment Intensity of Growth? A Cross-Country Analysis," IMF Working Papers 12/218, International Monetary Fund.
  17. Bergljot Barkbu & Jesmin Rahman & Rodrigo O. Valdés, 2012. "Fostering Growth in Europe Now," IMF Staff Discussion Notes 12/07, International Monetary Fund.
  18. repec:hal:wpaper:halshs-00963134 is not listed on IDEAS
  19. 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, Economic Issues, vol. 14(1), pages 17-34, March.

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