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More Alike than Different: The Spanish and Irish Labour Markets Before and After the Crisis

Author

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  • Agnese, Pablo

    () (UIC Barcelona)

  • Salvador, Pablo F.

    () (Universidad Nacional de Cuyo)

Abstract

This paper analyses the labour markets of Spain and Ireland, which have experienced a severe downturn in the recent global crisis as reflected by the largest increases in their unemployment rates among other developed economies. Spain and Ireland might seem at first to feature very different labour markets, which go from very tight to very flexible labour conditions. Our analysis, however, goes beyond this simplistic argument and brings to light the strong commonalities that seem to have been hidden underground. We estimate a dynamic multi-equation structural model for each country, and then offer two sets of dynamic simulations which account for the swings of the unemployment rates before and after the 2007 crisis. Our results suggest looking beyond the degree of flexibility of both labour markets, just to focus instead on other variables usually neglected by more conventional approaches. In particular, such variables as the growth of capital stock, the growth of labour productivity, and demographics, succeed in explaining a great part of the changes in unemployment in both countries.

Suggested Citation

  • Agnese, Pablo & Salvador, Pablo F., 2011. "More Alike than Different: The Spanish and Irish Labour Markets Before and After the Crisis," IZA Discussion Papers 5742, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp5742
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    References listed on IDEAS

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    More about this item

    Keywords

    PIGS; chain reaction theory; simulations; structural multi-equation models; unemployment dynamics;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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