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'Actual' versus 'Virtual' Employment in Europe: Is Spain Different?

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  • Marimon, Ramon
  • Zilibotti, Fabrizio

Abstract

We study the evolution of sectoral employment and labour cost in 11 European countries over the last two decades. Our statistical approach consists of decompositions for country, industry and temporal effects. Virtual economies are constructed by filtering country effects. We find that sectoral effects account for more than 80% of the long-run differentials across countries and industries in employment growth, whereas country-specific effects are more important in the analysis of labour-cost dynamics. The initial distribution of labour across sectors plays a crucial role in explaining cross-country differences in employment. We pay special attention to Spain, a country that has experienced a high persistent unemployment rate, and show that this may be the result of a severe sectoral reallocation problem, originating from the very heavy weight of agricultural employment in 1975. Our study of the virtual economies also provides new evidence about the relative performance of some industries and countries, e.g. the poor performance of Belgium, the relatively good performance of Italy, in particular its textile sector, etc.

Suggested Citation

  • Marimon, Ramon & Zilibotti, Fabrizio, 1996. "'Actual' versus 'Virtual' Employment in Europe: Is Spain Different?," CEPR Discussion Papers 1427, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:1427
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    References listed on IDEAS

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    1. Mortensen, Dale & Pissarides, Christopher, 2011. "Job Creation and Job Destruction in the Theory of Unemployment," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 1-19.
    2. Blanchard, Olivier & Jimeno, Juan F, 1995. "Structural Unemployment: Spain versus Portugal," American Economic Review, American Economic Association, pages 212-218.
    3. Stockman, Alan C., 1988. "Sectoral and national aggregate disturbances to industrial output in seven European countries," Journal of Monetary Economics, Elsevier, vol. 21(2-3), pages 387-409.
    4. Costello, Donna M, 1993. "A Cross-Country, Cross-Industry Comparison of Productivity Growth," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 207-222, April.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Decomposition; Employment; Labour Cost; Panel Data; Sectoral Effects; Spain; Virtual Economy;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

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