The Role of Labor-Market Changes in the Slowdown of European Productivity
This paper is about the role of policy, institutions, and culture in creating a strong negative tradeoff between productivity and employment growth across groups of countries within Europe. Throughout the postwar era until 1995 labor productivity grew faster in Europe than in the United States. In the decade after 1995, productivity growth in the EU-15 slowed while that in the US accelerated. Europe’s productivity growth slowdown was largely offset by faster growth than the US in employment per capita, leaving little difference in growth of output per capita between the EU and US going back to 1980. We document the productivity-employment tradeoff in the raw data, in regressions that control for the two-way causation between productivity and employment growth, and we show that there is a robust negative correlation between productivity and employment growth across countries and time. We find that the negative effect of changes in employment per capita on changes in productivity is robust to alternative instruments and to the inclusion or exclusion of particular countries like Italy or Spain. We conclude by suggesting that evaluations of alternative policy reforms in Europe should take into account any offsetting effects on employment and productivity by examining the ultimate impact on changes in income per capita.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 3 (2012)
Issue (Month): 2 ()
|Contact details of provider:|| Postal: via Pascoli, 20 - 06123 Perugia|
Phone: +39 075 5855279
Fax: +39 075 5855299
Web page: http://www.rei.unipg.it/rei/
More information through EDIRC