Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/91745
Authors: 
Turrini, Alessandro
Year of Publication: 
2012
Series/Report no.: 
IZA Policy Paper 47
Abstract: 
This paper estimates the impact of fiscal consolidation on unemployment and job market flows across EU countries using a recent database of consolidation episodes built on the basis of a “narrative” approach (Devries et al., 2011). Results show that the impact of fiscal consolidation on cyclical unemployment is temporary and significant mostly for expenditure measures. As expected, the impact of fiscal policy shocks on job separation rates is much stronger in low-EPL countries, while high-EPL countries suffer from a stronger reduction in the rate at which new jobs are created. Since a reduced job-finding rate corresponds to a longer average duration of unemployment spells, fiscal policy shocks also tend to have a stronger impact on long-term unemployment if EPL is stricter. Results are broadly confirmed when using top-down fiscal consolidation measures based on adjusting budgetary data for the cycle.
Subjects: 
fiscal consolidation
unemployment
job market flows
employment protection legislation
labour market reforms
JEL: 
E62
J63
J65
Document Type: 
Working Paper

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