Unemployment in the European Union: institutions, prices, and growth

Arbeitspapier

This paper presents a reappraisal of unemployment movements in the European Union. Our analysis is based on the chain reaction theory of unemployment, which focuses on (a) the interaction among labor market adjustment processes, (b) the interplay between these adjustment processes and the dynamic structure of labor market shocks, and (c) the interaction between the adjustment processes and economic growth. We divide the shocks into institutional variables, price variables, and growth drivers. Estimating a system of labor market equations for a panel of EU countries, we derive the dynamic unemployment responses to each shock. Our analysis permits us to distinguish between the short- and longrun effects of the shocks. Different shocks generate different degrees of "unemployment persistence" (responses to temporary shocks) and "unemployment responsiveness" (responses to permanent shocks). We find that the growth drivers play a dominant role in accounting for the main swings in EU unemployment.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 899

Classification and Topics

• Classification: Wirtschaft ; Unemployment: Models, Duration, Incidence, and Job Search ; Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data) ; Prices, Business Fluctuations, and Cycles: Forecasting and Simulation: Models and Applications ; Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions ; Mobility, Unemployment, Vacancies, and Immigrant Workers: General
• Subject: unemployment ; natural rate ; labor market shocks ; chain reaction theory ; Arbeitslosigkeit ; Hysteresis ; Schock ; Arbeitsmarktflexibilisierung ; Internationaler Wettbewerb ; Konjunktur ; Schätzung ; EU-Staaten

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Karanassou, Marika ; Sala, Héctor ; Snower, Dennis J.
• Event: Veröffentlichung
• (who): Institute for the Study of Labor (IZA)
• (where): Bonn
• (when): 2003

Further information

• Handle: http://hdl.handle.net/10419/3061
• Last update: 10.03.2025, 11:44 AM CET