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Labour market adjustments in Europe and the US: How different?

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  • Smets, Frank
  • Beyer, Robert C. M.

Abstract

We compare the labour market response to region-specific shocks in Europe and the US and to national shocks in Europe and investigate changes over time. We employ a multi-level factor model to decompose regional labour market variables and then estimate the dynamic response of the employment level, the employment rate and the participation rate using the region-specific variables and the country factors. We find that both in Europe and the US labour mobility accounts for about 50% of the long run adjustment to region-specific labour demand shocks and only a little more in the US than in Europe, where adjustment takes twice as long. In Europe labour mobility is a less important adjustment mechanism in response to country-specific labour demand shocks that cause stronger and more persistent reactions of the employment and the participation rate. However, we detect a convergence of the adjustment processes in Europe and the US, reflecting both a fall in interstate migration in the US and a rise in the role of migration in Europe. Finally, we show that part of the difference between Europe and the US in previous studies may be due to the use of different data sources. JEL Classification: F2, J6, R23, R30

Suggested Citation

  • Smets, Frank & Beyer, Robert C. M., 2015. "Labour market adjustments in Europe and the US: How different?," Working Paper Series 1767, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20151767
    Note: 58657
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    Cited by:

    1. Jeroen Hessel, 2019. "Medium-term asymmetric fluctuations and EMU as an optimum currency area," DNB Working Papers 644, Netherlands Central Bank, Research Department.
    2. repec:mup:actaun:actaun_2018066061497 is not listed on IDEAS
    3. Mai Dao & Davide Furceri & Prakash Loungani, 2014. "Regional Labor Market Adjustments in the United States," IMF Working Papers 14/211, International Monetary Fund.
    4. Emanuele Ciani & Francesco David & Guido de Blasio, 2017. "Local labour market heterogeneity in Italy: estimates and simulations using responses to labour demand shocks," Temi di discussione (Economic working papers) 1112, Bank of Italy, Economic Research and International Relations Area.
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    6. Angulo, Ana & Burridge, Peter & Mur, Jesús, 2018. "Testing for breaks in the weighting matrix," Regional Science and Urban Economics, Elsevier, vol. 68(C), pages 115-129.
    7. Bakas, Dimitrios & Panagiotidis, Theodore & Pelloni, Gianluigi, 2016. "On the significance of labour reallocation for European unemployment: Evidence from a panel of 15 countries," Journal of Empirical Finance, Elsevier, vol. 39(PB), pages 229-240.
    8. Miriam Mutambudzi & Zulqarnain Javed, 2016. "Job Strain as a Risk Factor for Incident Diabetes Mellitus in Middle and Older Age U.S. Workers," Journals of Gerontology: Series B, Gerontological Society of America, vol. 71(6), pages 1089-1096.
    9. Olivier Damette & Mathilde Maurel & Michael A. Stemmer, 2016. "What does it take to grow out of recession? An error-correction approach towards growth convergence of European and transition countries," Post-Print halshs-01318131, HAL.
    10. Heinisch, Katja & Holtemöller, Oliver & Schult, Christoph, 2019. "Power generation and structural change: Quantifying economic effects of the coal phase-out in Germany," IWH Discussion Papers 16/2019, Halle Institute for Economic Research (IWH).
    11. Braun, Sebastian & Weber, Henning, 2016. "How do regional labor markets adjust to immigration? A dynamic analysis for post-war Germany," Kiel Working Papers 2025, Kiel Institute for the World Economy (IfW).
    12. Robert Beyer & Michael Stemmer, 2015. "From progress to nightmare - European regional unemployment over time," DNB Working Papers 458, Netherlands Central Bank, Research Department.
    13. Michael Amior & Alan Manning, 2018. "The Persistence of Local Joblessness," American Economic Review, American Economic Association, vol. 108(7), pages 1942-1970, July.
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    15. Giuseppe Bertola & John Driffill & Harold James & mult. Hans-Werner Sinn & Jan-Egbert Sturm & ÁkosValentinyi, 2015. "Chapter 3: European Regional Disparity: Borders Strike Back," EEAG Report on the European Economy, CESifo Group Munich, vol. 0, pages 66-77, February.
    16. Beblavý, Miroslav & Marconi, Gabriele & Maselli,Ilaria, 2015. "A European Unemployment Benefits Scheme: The rationale and the challenges ahead," CEPS Papers 10952, Centre for European Policy Studies.
    17. Olivier Damette & Mathilde Maurel & Michael A. Stemmer, 2016. "What does it take to grow out of recession? An error-correction approach towards growth convergence of European and transition countries," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-01318131, HAL.
    18. Florence Huart & Médédé Tchakpalla, 2019. "Labor Market Conditions and Geographic Mobility in the Eurozone," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 61(2), pages 263-284, June.
    19. Plamen Nikolov & Paolo Pasimeni, 2019. "Fiscal Stabilization in the United States: Lessons for Monetary Unions," Economics Working Paper Archive wp_926, Levy Economics Institute.
    20. Christopher House & Christian Proebsting & Linda Tesar, 2018. "The Benefits of Labor Mobility in a Currency Union," 2018 Meeting Papers 876, Society for Economic Dynamics.
    21. Barslund, Mikkel & Busse, Matthias, 2016. "Labour Mobility in the EU: Addressing challenges and ensuring ‘fair mobility’," CEPS Papers 11705, Centre for European Policy Studies.
    22. László Andor, 2016. "Towards shared unemployment insurance in the euro area," IZA Journal of European Labor Studies, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 5(1), pages 1-15, December.

    More about this item

    Keywords

    European integration; labour mobility; migration; regional labour markets;

    JEL classification:

    • F2 - International Economics - - International Factor Movements and International Business
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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