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Technical change, sectoral dislocation and barriers to labor mobility: Factors behind the great recession

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  • Valentini, Enzo
  • Arlotti, Marco
  • Compagnucci, Fabiano
  • Gentili, Andrea
  • Muratore, Fabrizio
  • Gallegati, Mauro

Abstract

The global financial and economic crisis, which began in late 2007 (Great Recession) is the worst international crisis since 1929 (Great Depression), and still affects many countries. This paper attempts to determine if the theory of “extended crises” presented by Delli Gatti et al. (2012) is consistent with empirical evidence. The analysis is carried out using two approaches. The first part of the paper is purely descriptive and is dedicated to a comparison between structural differences and different patterns of development in six countries: France, Germany, Italy, Spain, UK and US. Using data on the major world economies (KLEMS and STAN) since 1970, we show that the fundamentals behind the “extended crisis theory” apply to these economies. We focus particularly on Italy, Germany and the US. Among large economies, Italy is one of the most affected and still not recovering, even though the Italian financial sector appeared to have been less exposed to the 2008 shock than other countries. The crisis in Italy could be directly connected to the failure of the Italian economy to move to an economic system based on more skill-intensive production, in particular in the service sector (as in the US). The US financial sector was extremely exposed to the 2008 sub-prime crisis but US economy recovered much faster than in many European countries. Germany is the leading European economy, generally considered in European public debate as the example to be followed. In the last part of the paper the analysis is broadened, involving more countries in a panel analysis approach: different specifications of panel probit/logit models are presented, in a first attempt to investigate the roles of both structural features and financial shock in explaining the extent of the crisis in different countries.

Suggested Citation

  • Valentini, Enzo & Arlotti, Marco & Compagnucci, Fabiano & Gentili, Andrea & Muratore, Fabrizio & Gallegati, Mauro, 2017. "Technical change, sectoral dislocation and barriers to labor mobility: Factors behind the great recession," Journal of Economic Dynamics and Control, Elsevier, vol. 81(C), pages 187-215.
  • Handle: RePEc:eee:dyncon:v:81:y:2017:i:c:p:187-215
    DOI: 10.1016/j.jedc.2017.05.005
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    Cited by:

    1. Croci Angelini, Elisabetta & Farina, Francesco & Valentini, Enzo, 2017. "Wages and employment by skill level in Southern and Eastern Europe during the crisis," GLO Discussion Paper Series 153, Global Labor Organization (GLO).
    2. Cutrini, Eleonora, 2019. "Economic integration, structural change, and uneven development in the European Union," Structural Change and Economic Dynamics, Elsevier, vol. 50(C), pages 102-113.
    3. Elisabetta Croci Angelini & Francesco Farina & Enzo Valentini, 2020. "Wage and employment by skill levels in technological evolution of South and East Europe," Journal of Evolutionary Economics, Springer, vol. 30(5), pages 1497-1514, November.
    4. Compagnucci, Fabiano & Gentili, Andrea & Valentini, Enzo & Gallegati, Mauro, 2021. "Have jobs and wages stopped rising? Productivity and structural change in advanced countries," Structural Change and Economic Dynamics, Elsevier, vol. 56(C), pages 412-430.
    5. Califano, Andrea & Gasperin, Simone, 2019. "Multi-speed Europe is already there: Catching up and falling behind," Structural Change and Economic Dynamics, Elsevier, vol. 51(C), pages 152-167.

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    More about this item

    Keywords

    Extended crises; Structural change; Productivity; Knowledge economy;
    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
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • N30 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - General, International, or Comparative
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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