IDEAS home Printed from https://ideas.repec.org/a/kap/empiri/v46y2019i3d10.1007_s10663-018-9410-1.html
   My bibliography  Save this article

Unit labour costs and the dynamics of output and unemployment in the southern European crisis countries

Author

Listed:
  • Juan Carlos Cuestas

    () (Eesti Pank
    Tallinn University of Technology
    Jaume I University)

  • Javier Ordóñez

    (Jaume I University)

  • Karsten Staehr

    (Eesti Pank
    Tallinn University of Technology)

Abstract

Abstract The GIPS countries, the southern European crisis countries, have seen depressed output dynamics and high unemployment rates during the great recession following the 2007–2008 financial crisis. This paper considers the effects of measures that seek to improve competitiveness by reducing real unit labour costs. The results are derived in structural vector autoregressive models for each of the GIPS counties as well as two reference countries, Germany and the Netherlands. The responses of output and unemployment to innovations in real unit labour costs are economically and statistically significant for Germany and the Netherlands, whereas the responses are typically muted and imprecise estimated for the GIPS countries. The small and uncertain effects raise doubts regarding the efficacy of measures that seek to lower real unit labour costs in the GIPS countries.

Suggested Citation

  • Juan Carlos Cuestas & Javier Ordóñez & Karsten Staehr, 2019. "Unit labour costs and the dynamics of output and unemployment in the southern European crisis countries," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 46(3), pages 597-616, August.
  • Handle: RePEc:kap:empiri:v:46:y:2019:i:3:d:10.1007_s10663-018-9410-1
    DOI: 10.1007/s10663-018-9410-1
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s10663-018-9410-1
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Jordi Galí & Tommaso Monacelli, 2013. "Understanding the gains from wage flexibility: The exchange rate connection," Economics Working Papers 1408, Department of Economics and Business, Universitat Pompeu Fabra, revised Jun 2016.
    2. Valeria Cirillo & Marta Fana & Dario Guarascio, 2017. "Labour market reforms in Italy: evaluating the effects of the Jobs Act," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 34(2), pages 211-232, August.
    3. Sims, Christopher A., 1988. "Bayesian skepticism on unit root econometrics," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 463-474.
    4. Christian Daude, 2016. "Structural reforms to boost inclusive growth in Greece," OECD Economics Department Working Papers 1298, OECD Publishing.
    5. Dolado, Juan J. & Jimeno, Juan F., 1997. "The causes of Spanish unemployment: A structural VAR approach," European Economic Review, Elsevier, vol. 41(7), pages 1281-1307, July.
    6. Hubert Gabrisch & Karsten Staehr, 2015. "The Euro Plus Pact: Competitiveness and External Capital Flows in the EU Countries," Journal of Common Market Studies, Wiley Blackwell, vol. 53(3), pages 558-576, May.
    7. Blanchard, Olivier & Wolfers, Justin, 2000. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," Economic Journal, Royal Economic Society, vol. 110(462), pages 1-33, March.
    8. Holger Zemanek, 2010. "Competitiveness Within The Euro Area: The Problem That Still Needs To Be Solved," Economic Affairs, Wiley Blackwell, vol. 30(3), pages 42-47, October.
    9. Pedro Bação & António Portugal Duarte & Diana Machado, 2016. "Exchange Rates, the Competitiveness of Nations and Unemployment," GEMF Working Papers 2016-14, GEMF, Faculty of Economics, University of Coimbra.
    10. Gnimassoun, Blaise & Mignon, Valérie, 2016. "How Do Macroeconomic Imbalances Interact? Evidence From A Panel Var Analysis," Macroeconomic Dynamics, Cambridge University Press, vol. 20(07), pages 1717-1741, October.
    11. Olivier Blanchard & Pedro Portugal, 2017. "Boom, slump, sudden stops, recovery, and policy options. Portugal and the Euro," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 16(3), pages 149-168, December.
    12. Christian Dustmann & Bernd Fitzenberger & Uta Sch?nberg & Alexandra Spitz-Oener, 2014. "From Sick Man of Europe to Economic Superstar: Germany's Resurgent Economy," Journal of Economic Perspectives, American Economic Association, vol. 28(1), pages 167-188, Winter.
    13. Stephanie Schmitt-Grohé & Martín Uribe, 2016. "Downward Nominal Wage Rigidity, Currency Pegs, and Involuntary Unemployment," Journal of Political Economy, University of Chicago Press, vol. 124(5), pages 1466-1514.
    14. Mariarosaria Comunale, 2017. "A panel VAR analysis of macro-financial imbalances in the EU," Bank of Lithuania Working Paper Series 40, Bank of Lithuania.
    15. Charles Wyplosz, 2013. "The Eurozone Crisis and the Competitiveness Legend," Asian Economic Papers, MIT Press, vol. 12(3), pages 63-81, Fall.
    16. Jordi Galí & Tommaso Monacelli, 2016. "Understanding the Gains from Wage Flexibility: The Exchange Rate Connection," American Economic Review, American Economic Association, vol. 106(12), pages 3829-3868, December.
    17. Engelbert Stockhammer & Dimitris P. Sotiropoulos, 2014. "Rebalancing the Euro Area: The Costs of Internal Devaluation," Review of Political Economy, Taylor & Francis Journals, vol. 26(2), pages 210-233, April.
    18. Cholezas, Ioannis & Kanellopoulos, Nikolaos C., 2015. "Labour market reforms in Greece and the wage curve," Economics Letters, Elsevier, vol. 136(C), pages 19-21.
    19. Hans-Werner Sinn, 2014. "Austerity, Growth and Inflation: Remarks on the Eurozone's Unresolved Competitiveness Problem," The World Economy, Wiley Blackwell, vol. 37(1), pages 1-13, January.
    20. Litterman, Robert B, 1986. "Forecasting with Bayesian Vector Autoregressions-Five Years of Experience," Journal of Business & Economic Statistics, American Statistical Association, vol. 4(1), pages 25-38, January.
    21. Valeria Cirillo & Dario Guarascio, 2015. "Jobs and Competitiveness in a Polarised Europe," Intereconomics: Review of European Economic Policy, Springer;German National Library of Economics;Centre for European Policy Studies (CEPS), vol. 50(3), pages 156-160, May.
    22. Gros, Daniel, 2016. "Adjustment within the Euro Area: Is it all about competitiveness?," CEPS Papers 11260, Centre for European Policy Studies.
    23. Paolo Guerrieri & Piero Esposito, 2013. "Intra-European imbalances, adjustment, and growth in the eurozone," Oxford Review of Economic Policy, Oxford University Press, vol. 28(3), pages 532-550, AUTUMN.
    24. Staehr, Karsten & Vermeulen, Robert, 2016. "How competitiveness shocks affect macroeconomic performance across euro area countries," Working Paper Series 1940, European Central Bank.
    25. Storm, Servaas & Naastepad, C.W.M., 2015. "Crisis and recovery in the German economy: The real lessons," Structural Change and Economic Dynamics, Elsevier, vol. 32(C), pages 11-24.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Internal devaluation; Economic crisis; GIPS; SVAR; Bayesian econometrics;

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy

    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:kap:empiri:v:46:y:2019:i:3:d:10.1007_s10663-018-9410-1. 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: (Sonal Shukla) or (Mallaigh Nolan). General contact details of provider: http://www.springer.com .

    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 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.

    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.