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Title:Unemployment in the European Union: institutions, prices, and growth PDF Logo
Authors:Karanassou, Marika
Sala, Héctor
Snower, Dennis J.
Issue Date:2003
Citation:[Series:] IZA discussion papers [Editor:] Forschungsinstitut zur Zukunft der Arbeit, Bonn [No.:] 899
Series/Report no.:IZA Discussion paper series 899
Abstract: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.
Subjects:unemployment , natural rate , labor market shocks , chain reaction theory
JEL:J64
E30
E37
J32
J60
Document Type:Working Paper
Appears in Collections:Publikationen von Forscherinnen und Forschern des IfW
IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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