Crisis, Adjustment and Resilience in the Greek Labor Market: An Unemployment Decomposition Approach

Abstract

The crisis in Greece led to one of the largest economic shocks in European history. Drawing on micro-data from the Greek Labour Force Survey, we utilize standard micro-econometric methods and non-linear decomposition techniques to measure the size of the shock exerted on the Greek regional and national labor markets and the compositional and price adjustments in response to this. We find elements of economic dynamism, with some sizeable price adjustments in the economy of the Greek capital, Athens; but overall our results show that compositional adjustments (in labor quality/characteristics) have been partial and limited, becoming stronger only in the more recent recovery. Our results suggest a significant metropolitan advantage with regard to economic resilience, coming predominantly from a more efficient functioning of the labor market in metropolitan areas vis-a-vis other regions. Our use of the decomposition techniques for the analysis of macro-level developments in the labor market offers a novel perspective to the application of the decomposition methodology.

Drivers of convergence: The role of first- and second-nature geography

“…The effect of education is in a similar direction, showing convergence between regions with different levels of human capital (catch-up convergence) but divergence within groups of regions with similarly low levels of human capital (club formation at the top). 24 These patterns of convergence and divergence along the education axis may be related to disparate regional dynamics with regard to levels of, and returns to, education (Lo´pez-Bazo et al, 2017;Monastiriotis and Martelli, 2020). Instead, the inactivity indicator, which we take to proxy for (the inverse of) labour market dynamism, shows divergence across regions of different labour market dynamisms -suggesting that regions with low activity rates have been systematically left behind in the growth process of the country.…”

“…Also, known differences exist in economic structures between island and mainland regions (e.g. with regard to tourism - Armstrong et al, 2014), as well as between peripheral, metropolitan and urban/rural regions (Monastiriotis, 2009;Monastiriotis and Martelli, 2020).…”

Public Investment and Regional Resilience: Empirical Evidence from the Greek Regions

“…Urbanization demonstrated a negative impact as large metropolitan areas, such as Athens and Thessaloniki, indicated increased vulnerability in terms of income and employment (Psycharis et al 2014a;Panori 2017;Panori & Psycharis 2018). However, only a few studies have managed to explore the impact of public investments on this aspect for the case of the Greek regions (Psycharis et al 2014b(Psycharis et al , 2020bGiannakis & Bruggeman 2015;Petrakos & Psycharis 2016;Monastiriotis & Martelli 2020). The few existing empirical findings suggest that the procyclicality of public investment during periods of recession exposes Greek regions to higher risk (Psycharis et al 2014a(Psycharis et al , 2014bPetrakos & Psycharis 2016).…”

“…as regional market structure, demographic structure and urbanization are considered when exploring regional resilience (Petrakos & Psycharis 2016;Kakderi & Tasopoulou 2017;Monastiriotis & Martelli 2020). We expand this approach by arguing that it is also essential to encompass the idea of geographical heterogeneity on public investments and its various components, as their level may differ between regions.…”

Introduction to the Special Issue on “Territorial Resilience: Mitigation and Firms’ Adaptation”

“…The paper of Monastiriotis and Martelli (2021) also exploits the role of institutions on resilience, in this case from a labor market institutions point of view. They analyze the response to the Great Recession in Greece by measuring the size of the shock exerted on the Greek regional and national labor markets and the compositional and price adjustments in response to this.…”