IDEAS home Printed from https://ideas.repec.org/p/cep/cepdps/dp0349.html
   My bibliography  Save this paper

European versus US Unemployment: Different Responses to Increased Demand for skill?

Author

Listed:
  • Richard Jackman
  • Richard Layard
  • Marco Manacorda
  • Barbara Petrongolo

Abstract

According to Paul Krugman, "the European unemployment problem and the US inequality problem are two sides of the same coin". In other words, both continents have had the same shift in demand towards skill; in the US relative wages have adjusted and in Europe not. The implication of this hypothesis is that in Europe the unemployment rate for the unskilled will have risen but the unemployment rate for the skilled will have fallen. In fact it has risen. To investigate the hypothesis more systematically we develop an internally consistent model which allocates the change in a country's unemployment between that resulting from (a) shifts in relative demand for skill minus shifts in relative supply, (b) shifts in the relative intercepts of skilled and unskilled wage functions, (c) shifts in aggregate wage pressure. We show that the rise in British unemployment relative to the US since the 1970s is almost certainly due to shifts in aggregate wage pressure. Similarly for 5 other European countries the combination of (a) and (b) accounts for none of the increase in unemployment since the 1970s.

Suggested Citation

  • Richard Jackman & Richard Layard & Marco Manacorda & Barbara Petrongolo, 1997. "European versus US Unemployment: Different Responses to Increased Demand for skill?," CEP Discussion Papers dp0349, Centre for Economic Performance, LSE.
  • Handle: RePEc:cep:cepdps:dp0349
    as

    Download full text from publisher

    File URL: http://cep.lse.ac.uk/pubs/download/DP0349.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Paul R. Krugman, 1994. "Past and prospective causes of high unemployment," Economic Review, Federal Reserve Bank of Kansas City, issue Q IV, pages 23-43.
    2. David G. Blanchflower & Andrew J. Oswald, 1995. "The Wage Curve," MIT Press Books, The MIT Press, edition 1, volume 1, number 026202375x, January.
    3. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780199279173.
    4. Nickell, Stephen & Bell, Brian, 1995. "The Collapse in Demand for the Unskilled and Unemployment across the OECD," Oxford Review of Economic Policy, Oxford University Press, vol. 11(1), pages 40-62, Spring.
    5. Richard B. Freeman & Lawrence F. Katz, 1995. "Differences and Changes in Wage Structures," NBER Books, National Bureau of Economic Research, Inc, number free95-1.
    6. Juhn, Chinhui & Murphy, Kevin M & Pierce, Brooks, 1993. "Wage Inequality and the Rise in Returns to Skill," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 410-442, June.
    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. Jens Rubart, 2006. "Dismissal Protection or Wage Flexibility," Computing in Economics and Finance 2006 406, Society for Computational Economics.
    2. Floro Ernesto Caroleo, 2000. "Le politiche per l'occupazione in Europa: una tassonomia istituzionale," STUDI ECONOMICI, FrancoAngeli Editore, vol. 2000(71).
    3. Roed, Knut & Strom, Steinar, 2002. " Progressive Taxes and the Labour Market: Is the Trade-Off between Equality and Efficiency Inevitable?," Journal of Economic Surveys, Wiley Blackwell, vol. 16(1), pages 77-110, February.
    4. Roed, Knut, 2005. "Egalitarian wage policies, unemployment and skill-biased technological change," Research in Economics, Elsevier, vol. 59(4), pages 375-387, December.
    5. Carsten Ochsen, 2006. "Zukunft der Arbeit und Arbeit der Zukunft in Deutschland," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 7(2), pages 173-193, May.
    6. Pablo Burriel-Llombart & Jonathan Thomas, 2001. "Skill imbalances in the UK labour market: 1979-99," Bank of England working papers 145, Bank of England.
    7. repec:eee:labchp:v:3:y:1999:i:pc:p:3029-3084 is not listed on IDEAS
    8. Knut Røed & Morten Nordberg, 2004. "Have the relative employment prospects for the low-skilled deteriorated after all?," Journal of Population Economics, Springer;European Society for Population Economics, vol. 17(1), pages 67-82, February.
    9. Fitzenberger, Bernd & Franz, Wolfgang, 1997. "Flexibilität der qualifikatorischen Lohnstruktur und Lastverteilung der Arbeitslosigkeit: Eine ökonometrische Analyse für Westdeutschland," ZEW Discussion Papers 97-32, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    10. Andrew Brigden & Jonathan Thomas, 2003. "What does economic theory tell us about labour market tightness?," Bank of England working papers 185, Bank of England.
    11. Christopher Gerry & Tomasz Mickiewicz, 2006. "Inequality, Fiscal Capacity and the Political Regime: Lessons from the Post-Communist Transition," William Davidson Institute Working Papers Series wp831, William Davidson Institute at the University of Michigan.
    12. Jeff Borland, 2000. "Disaggregated Models of Unemployment in Australia," Melbourne Institute Working Paper Series wp2000n16, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.

    More about this item

    JEL classification:

    • R14 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Land Use Patterns
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General

    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:cep:cepdps:dp0349. 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: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP .

    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.