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Demographic and Education Effects on Unemployment in Europe: Economic Factors and Labour Market Institutions

  • Biagi, Federico

    ()

    (University of Padova)

  • Lucifora, Claudio

    ()

    (Università Cattolica del Sacro Cuore)

We analyse the effects of demographic and education changes on unemployment rates in Europe. Using a panel of European countries for the 1980-2000 period - disaggregated by cohort, gender and education -, we empirically test the economic effects of two stylised facts that have occurred in recent decades: the "baby bust" and the "education boom". We find that structural shifts in the population age structure play an important role and that a lot of variation is also attributable to educational changes, the latter usually neglected in aggregate studies. Results show that demographic and education shocks are qualitatively different for young (adult) workers as well as for more (less) educated people. While adult workers and more educated individuals, in general, experience lower unemployment rates, changes in the population age structure appear to be positively related to young workers' unemployment rates while they have no effect on adults. Conversely changes in the skill structure ("education boom"), even when controlling for skill-biased technological change, reduce the unemployment of the more educated. Labour market institutions also influence unemployment rates in different ways. Unemployment benefits are found to have a positive impact on unemployment, while bargaining coordination and employment protection reduce it.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1806.

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Length: 36 pages
Date of creation: Oct 2005
Date of revision:
Publication status: published in: Labour Economics, 2008, 15(5), 1076-1101
Handle: RePEc:iza:izadps:dp1806
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  1. Bertola, Giuseppe & Blau, Francine D & Kahn, Lawrence, 2002. "Labour Market Institutions and Demographic Employment Patterns," CEPR Discussion Papers 3448, C.E.P.R. Discussion Papers.
  2. David Card & Thomas Lemieux, 2000. "Can Falling Supply Explain the Rising Return to College for Younger Men? A Cohort-Based Analysis," NBER Working Papers 7655, National Bureau of Economic Research, Inc.
  3. Brunello, Giorgio & Lauer, Charlotte, 2004. "Are Wages in Southern Europe More Flexible? The Effects of Cohort Size on European Earnings," IZA Discussion Papers 1299, Institute for the Study of Labor (IZA).
  4. Acemoglu, Daron & Aghion, Philippe & Violante, Giovanni L., 2001. "Deunionization, technical change and inequality," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 55(1), pages 229-264, December.
  5. Daron Acemoglu, 2002. "Cross-Country Inequality Trends," NBER Working Papers 8832, National Bureau of Economic Research, Inc.
  6. Giuseppe Bertola & Francine D. Blau & Lawrence M. Kahn, 2001. "Comparative Analysis of Labor Market Outcomes: Lessons for the US from International Long-Run Evidence," NBER Working Papers 8526, National Bureau of Economic Research, Inc.
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