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

  • Gilles Mourre

This paper examines whether the pattern of growth in euro area employment seen in the period 1997 to 2001 differs from that recorded in the past and what could be the reasons. 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 to 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.

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Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 38 (2006)
Issue (Month): 15 ()
Pages: 1783-1807

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Handle: RePEc:taf:applec:v:38:y:2006:i:15:p:1783-1807
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  1. Bertola, Giuseppe, 1991. "Labour Turnover Costs and Average Labour Demand," CEPR Discussion Papers 601, C.E.P.R. Discussion Papers.
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  9. Julian Morgan, 2001. "Employment security and the demand for labour in Europe," Applied Economics, Taylor & Francis Journals, vol. 33(14), pages 1763-1774.
  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.
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