IDEAS home Printed from https://ideas.repec.org/a/bde/journl/y2012i01n03.html
   My bibliography  Save this article

Labour flows in the EU at the beginning of the crisis

Author

Listed:
  • José María Casado
  • Cristina Fernández-Vidaurreta
  • Juan F. Jimeno

Abstract

One of the most significant aspects of the current crisis is its varying impact on the labour market variables of different EU countries. For instance, in some, during the initial phase of the crisis the unemployment rate scarcely rose and, in fact, in Germany it decreased by approximately 1 pp. Four years after the crisis began, the unemployment rate in Germany is at a record low (of 5.8%), while in other countries – especially Spain and Ireland – it has reached similar or even higher levels than those recorded in the first half of the 1990s (see Chart 1). Understanding the reasons behind the different impact of the crisis on the labour market is crucial for designing policies which encourage job creation and accelerate the recovery. An increase in the unemployment rate may reflect higher job destruction, lower job creation, an increase in the labour force (due, for example, to the inflow into the unemployment pool of new population groups which were previously inactive in the labour market) or various combinations of these three basic driving forces. The type of shock received by an economy, the employment policies implemented in response to it and labour market institutional arrangements determine variations in these three underlying variables of the unemployment rate. Consequently, a mere international comparison of aggregate unemployment rates will generally offer an incomplete picture that will not analyse in enough detail all the different factors behind the change in unemployment in a given country, nor will it analyse the contribution of employment policies and labour market institutional arrangements to said change. Given the divergent performance of the unemployment rate in EU labour markets at the beginning of the crisis, it is reasonable to anticipate that the contribution to rising unemployment of higher job destruction, lower job creation and a fluctuating labour force has also been very mixed. In order to analyse the reasons for these differences, it is necessary to analyse labour flows and their demographic breakdown, i.e. the characteristics of the individuals comprising such flows. This type of analysis may also identify better the role played by employment policies and labour market institutional arrangements. For example, the impact of short-time working schemes, such as those implemented in Germany and Austria, among other countries, should affect transitions in the labour market from employment to unemployment. Similarly, changes in unemployment due to the “discouragement effect” (the unemployed who give up looking for work) or the “additional worker effect” (an individual who becomes active in response to another member of the family unit becoming unemployed) are observed more directly when studying flows between employment/unemployment and inactivity. This article analyses the variation in flows of workers between statuses of employment, unemployment and inactivity at the onset of the crisis, in order to identify some of the factors which may underpin the cross-country differences observed in the increase of unemployment during that period. For this purpose, using the micro data of the European Labour Force Survey published annually by Eurostat, the size of flows of workers between the three possible labour market states (employment, unemployment and inactivity) is quantified as well as its contribution to the rise in the unemployment rate at the onset of the crisis. The advantage of using this database is that a relatively homogeneous comparison can be made both in terms of definition of the variables and data collection between various EU countries. Thus, in this analysis the results obtained for 11 EU countries are compared: Austria, Belgium, Germany, Denmark, Spain, France, Greece, Italy, Portugal, Sweden and the United Kingdom. Furthermore, the micro breakdown of the survey not only makes it possible to quantify changes in the flows, as has been done in other studies, but also to identify the demographic characteristics of their constituent individuals. By contrast, Eurostat makes these data available with a slight lag which limits the time span for performing this analysis. A further caveat worth pointing out is that the results are influenced by the annual frequency of the data used, since with this sample frequency it is not possible to observe labour transitions which occur in a period of less than 12 months. These transitions may be important for certain population groups and, especially, in countries where the labour market institutional arrangements favour high labour turnover. Thus, the analysis presented below generally provides a lower level for the probabilities of moving between the three relevant labour market states: employment, unemployment and activity/inactivity.

Suggested Citation

  • José María Casado & Cristina Fernández-Vidaurreta & Juan F. Jimeno, 2012. "Labour flows in the EU at the beginning of the crisis," Economic Bulletin, Banco de España, issue JAN, pages 1-11, January.
  • Handle: RePEc:bde:journl:y:2012:i:01:n:03
    as

    Download full text from publisher

    File URL: http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/InformesBoletinesRevistas/BoletinEconomico/12/Ene/Files/art3e.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Robert Shimer, 2012. "Reassessing the Ins and Outs of Unemployment," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 15(2), pages 127-148, April.
    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. Ieva Brauksa & Ludmila Fadejeva, 2013. "Internal Labour Market Mobility in 2005-2011: The Case of Latvia," Working Papers 2013/02, Latvijas Banka.
    2. Ludmila Fadejeva & Ieva Opmane, 2016. "Internal labour market mobility in 2005–2014 in Latvia: the micro data approach," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 16(2), pages 152-174.

    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. Elsby, Michael W.L. & Hobijn, Bart & Şahin, Ayşegül, 2015. "On the importance of the participation margin for labor market fluctuations," Journal of Monetary Economics, Elsevier, vol. 72(C), pages 64-82.
    2. Jochen Mankart & Rigas Oikonomou, 2017. "Household Search and the Aggregate Labour Market," Review of Economic Studies, Oxford University Press, vol. 84(4), pages 1735-1788.
    3. Christopher A. Pissarides, 2007. "Unemployment And Hours Of Work: The North Atlantic Divide Revisited," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(1), pages 1-36, February.
    4. Marcelo Veracierto, 2007. "Establishments dynamics and matching frictions in classical competitive equilibrium," Working Paper Series WP-07-16, Federal Reserve Bank of Chicago.
    5. R. Jason Faberman & Taft Foster, 2013. "Unemployment among recent veterans during the Great Recession," Economic Perspectives, Federal Reserve Bank of Chicago, vol. 37(Q I), pages 1-13.
    6. Emin Dinlersoz & Henry Hyatt & Hubert Janicki, 2019. "Who Works for Whom? Worker Sorting in a Model of Entrepreneurship with Heterogeneous Labor Markets," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 34, pages 244-266, October.
    7. Iourii Manovskii & Marcus Hagedorn, 2011. "Search Frictions and Wage Dispersion," 2011 Meeting Papers 1195, Society for Economic Dynamics.
    8. Fatih Karahan & Serena Rhee, 2014. "Population aging, migration spillovers, and the decline in interstate migration," Staff Reports 699, Federal Reserve Bank of New York.
    9. Leo Kaas & Philipp Kircher, 2015. "Efficient Firm Dynamics in a Frictional Labor Market," American Economic Review, American Economic Association, vol. 105(10), pages 3030-3060, October.
    10. Gonzalo Castex & Roberto Gillmore, 2014. "Análisis de Flujos en el Mercado laboral Chileno," Working Papers Central Bank of Chile 731, Central Bank of Chile.
    11. Federico Di Pace & Matthias Hertweck, 2019. "Labor Market Frictions, Monetary Policy, and Durable Goods," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 32, pages 274-304, April.
    12. Gary Solon & Ryan Michaels & Michael W. L. Elsby, 2009. "The Ins and Outs of Cyclical Unemployment," American Economic Journal: Macroeconomics, American Economic Association, vol. 1(1), pages 84-110, January.
    13. Jonathan Heathcote & Fabrizio Perri & Gianluca Violante, 2020. "The Rise of US Earnings Inequality: Does the Cycle Drive the Trend?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 37, pages 181-204, August.
    14. Li, Xianghong & Zhao, Xinlei, 2016. "Strategic Default Induced by Loan Modification Programs," MPRA Paper 73594, University Library of Munich, Germany.
    15. Shigeru Fujita, 2011. "Dynamics of worker flows and vacancies: evidence from the sign restriction approach," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 26(1), pages 89-121, January/F.
    16. Leyva, Gustavo & Urrutia, Carlos, 2020. "Informality, labor regulation, and the business cycle," Journal of International Economics, Elsevier, vol. 126(C).
    17. Borowczyk-Martins, Daniel & Lalé, Etienne, 2020. "The ins and outs of involuntary part-time employment," Labour Economics, Elsevier, vol. 67(C).
    18. Costain, James & Nakov, Anton & Petit, Borja, 2018. "Monetary policy implications of state-dependent prices and wages," CEPR Discussion Papers 13398, C.E.P.R. Discussion Papers.
    19. Fabio Canova & David Lopez-Salido & Claudio Michelacci, 2009. "The ins and outs of unemployment: An analysis conditional on technology shocks," Economics Working Papers 1213, Department of Economics and Business, Universitat Pompeu Fabra, revised Jan 2012.
    20. Robert Dixon & G. C. Lim & Jan C. van Ours, 2015. "The effect of shocks to labour market flows on unemployment and participation rates," Applied Economics, Taylor & Francis Journals, vol. 47(24), pages 2523-2539, May.

    More about this item

    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:bde:journl:y:2012:i:01:n:03. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/bdegves.html .

    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: María Beiro. Electronic Dissemination of Information Unit. Research Department. Banco de España (email available below). General contact details of provider: https://edirc.repec.org/data/bdegves.html .

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.