Unemployment and Labor Reallocation in Europe

Abstract

Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW.Unemployment and labor reallocation in Europe * Jan Hogrefe * * ZEW MannheimAndreas Sachs * * * ZEW MannheimOctober 20, 2014 AbstractWe ask whether sectoral shocks and the subsequent labor reallocation are responsible for unemployment within selected European economies. Our measure of sectoral labor reallocation is adjusted for aggregate influences and the remaining variation is linked to unemployment in country specific dynamic models. For Spain, the ADL-model estimation reveals a significant impact of sectoral reallocation on unemployment that goes beyond usual business cycle patterns. In Italy, there is weaker yet detectable evidence for this mechanism. In Ireland, Portugal and France, no significant influence of sector level shocks on unemployment is found. The results emphasize the potential structural supply side policies have for reducing unemployment in Spain.JEL-Classification: E24, J62, J64

On the significance of labour reallocation for European unemployment: Evidence from a panel of 15 countries

“…This view has attracted the attention of researchers who have been trying to substantiate it econometrically from different perspectives. Hogrefe and Sachs (2014) analyse a subset of EU countries (France, Ireland, Italy, Portugal, Spain) and use a difference specification of Okun's approach (Okun, 1962) to estimate separately error correction models for each country. Their findings show that sectoral reallocations drove Spanish unemployment over the decade [2004][2005][2006][2007][2008][2009][2010][2011][2012][2013][2014], while they are not significantly related to unemployment in France, Ireland and Portugal and are only marginally significant in Italy.…”

“…As Hogrefe and Sachs (2014), we are interested in testing and measuring the impact of inter-sectoral reallocation on unemployment. However, operationally we are closer to Dao et al (2014) and Beyer and Smets (2015) though their interest is mainly on migration while ours is on unemployment.…”

“…Recently this insight about the relative importance of (within) state regional heterogeneity for unemployment has been explored, with different emphasis on sectoral reallocation or regional mobility using country specific dynamic reduced form equation or panel SVAR's (see Dao et al (2014), Hogrefe and Sachs (2014) and Beyer and Smets (2015) among others). These approaches have provided contradictory results.…”

“…These approaches have provided contradictory results. Hogrefe and Sachs (2014) have shed doubts on the relevance of sectoral reallocations for some of the "troubled economies" of the EU. On the other hand, Dao et al (2014) and Beyer and Smets (2015) assign a significant, and possibly increasing, importance to both region-specific shocks and reallocation of jobs (and labor) across regions.…”

Effects of Labor Reallocation on Productivity and Inequality—insights From Studies on Transition

“…Blanchard et al ., ). Over the recent Great Recession, large structural shifts were observed in both the United States (e.g., Elsby et al ., ; Herkenhoff and Ohanian, ) and the European economies (e.g., Burda et al ., ; Van Dalen and Henkens, ; Anghel et al ., ; Hogrefe and Sachs, ). Sectoral reallocation can play a considerable part in reinforcing the recessionary pressure, as argued by Aaronson et al .…”