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Did the pattern of aggregate employment growth change in the euro area in the late 1990s?

Author

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  • Mourre, Gilles
Abstract
The paper examines whether the pattern of growth in euro area employment seen in the period 1997-2001 differed from that recorded in the past and what could be the reasons for that. First, a standard employment equation is estimated for the euro area as a whole. This shows that the lagged impact of both output growth and real labour cost growth, together with a productivity trend and employment "inertia", can account for most of the employment developments between 1970 and the early 1990s. Conversely, these traditional determinants can only explain part of the employment development seen in recent years (1997-2001). Second, the paper shows sound evidence of a structural break in the aggregate employment equation in the late 1990s. Third, the paper provides some tentative explanations for this change in aggregate employment developments, using in particular country panels of institutional variables and of active labour market policies but also cross-sectional analyses. Among the relevant factors likely to have contributed to rising aggregate employment in recent years are changes in the sectoral composition of euro area employment, the strong development of part-time jobs, lower labour tax rates and possibly less stringent employment protection legislation and greater subsidies to private employment. JEL Classification: C2, E24, H50, J23

Suggested Citation

  • Mourre, Gilles, 2004. "Did the pattern of aggregate employment growth change in the euro area in the late 1990s?," Working Paper Series 358, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:2004358
    as

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    File URL: https://www.ecb.europa.eu//pub/pdf/scpwps/ecbwp358.pdf
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    References listed on IDEAS

    as
    1. Michèle Belot & Jan C. van Ours, 2004. "Does the recent success of some OECD countries in lowering their unemployment rates lie in the clever design of their labor market reforms?," Oxford Economic Papers, Oxford University Press, vol. 56(4), pages 621-642, October.
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    More about this item

    Keywords

    Active labour market policies.; Aggregate employment; Demand for labour; euro area; Labour Market Institutions;
    All these keywords.

    JEL classification:

    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

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