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ifo Institut – Leibniz-Institut für Wirtschaftsforschung an der Universität München >
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http://hdl.handle.net/10419/3269
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| Title: | | Unemployment in the European Union: Institutions, prices, and growth  |
| Authors: | | Karanassou, Marika Sala, Héctor Snower, Dennis J. |
| Issue Date: | | 2004 |
| Series/Report no.: | | CESifo working papers 1247 |
| 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 Employment Labor force participation Wage determination |
| JEL: | | E30 J64 E37 J32 J60 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Publikationen von Forscherinnen und Forschern des IfW Economists Online CESifo Working Papers, CESifo Group Munich
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