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The ins and outs of European unemployment

Petrongolo, Barbara and Pissarides, Christopher (2008) The ins and outs of European unemployment. American Economic Review, 98 (2). pp. 256-262. ISSN 0002-8282

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Abstract

In this paper we study the contribution of inflows and outflows to the dynamics of unemployment in three European countries, the United Kingdom, France and Spain. All countries are interesting in their own right and in the comparison with each other. Britain’s labour markets were strictly regulated up to the mid 1980s but they have been liberalized since then. France is still a regulated economy compared with Britain, with unemployment averaging about 8%. Spain has had the biggest rise in unemployment in Europe, reaching 24% in the mid 1990s, but policy reforms and fast growth since then brought it down to a level below France’s. We compare performance in these three countries making use of both administrative and labor force survey data. We find that the impact of the 1980s reforms in Britain is evident in the contributions of the inflow and outflow rates. The inflow rate became a bigger contributor after the mid 1980s, although its significance subsided again in the late 1990s and 2000s. In France the dynamics of unemployment are driven by the outflow rate virtually entirely, which is consistent with a regime with strict employment protection legislation. In Spain, however, both rates contribute significantly to the dynamics, perhaps as a consequence of the prominence of fixed-term contracts since the late 1980s.

Item Type: Article
Official URL: http://www.aeaweb.org/aer/
Additional Information: © 2008 American Economic Association
Library of Congress subject classification: H Social Sciences > HD Industries. Land use. Labor
Journal of Economic Literature Classification System: I - Health, Education, and Welfare > I3 - Welfare and Poverty > I38 - Government Policy; Provision and Effects of Welfare Programs
Sets: Collections > Economists Online
Research centres and groups > Centre for Economic Performance (CEP)
Departments > Economics
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Date Deposited: 29 Feb 2008
URL: http://eprints.lse.ac.uk/3607/

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