Since the onset of the great recession in peripheral Europe, nominal hourly wages have not fallen much from the high levels they had reached during the boom years in spite of widespread increases in unemployment. This paper analyses a number of national and supranational policy options for alleviating the unemployment problem, arguing that it is unlikely that a solution will come from within national borders.
This paper provides an overview and synthesis of the literatures analysing games where players are connected via a network structure. While it focuses on the game theoretic modeling, it also also include some discussion of analyses of peer effects, as well as applications to diffusion, employment, crime, industrial organisation, and education.
The German labour market: Low worker flows and large volatilities
Hermann Gartner, Christian Merkl, Thomas Rothe08 August 2012
The upside to a rigid labour market, so the argument goes, is that the downside isn’t so bad. This column compares evidence from the job markets in Germany and the US. It argues that Germany is actually far more volatile.
Business cycle fluctuations are associated with large ups and downs of the labour market (see Shimer 2005 for the US). The increased probability of losing a job and the reduced probability of finding a job in a recession may be considered as one of the major costs of an economic downturn. Nevertheless, there is only very limited knowledge of cross-country differences of labour market dynamics over the business cycle. Most economists probably expect that – due to rigidities on the German labour market – the business cycle volatility of the labour market is smaller in Germany than in the US.
How local are labour markets? A look at the London Olympics
Alan Manning, Barbara Petrongolo03 August 2012
Will the London Olympics provide a major boost for employment in Stratford, as promised? This column presents evidence from a study in the UK, which, if applied to the Olympics, suggests that we shouldn’t count on it – many of the jobs will go to other Londoners.
How local are labour markets? A number of important questions in labour economics hinge on the answer.
In recent years there has been a resurgence of interest in the consequences of localisation of economic activity for workers' welfare (see Moretti 2011, for a recent overview) and in policies aimed to improve labour market outcomes in disadvantaged areas (Glaeser and Gottlieb 2008).
Guillermo Calvo, Fabrizio Coricelli, Pablo Ottonello24 July 2012
Economic output in the US seems to have recovered since the Great Recession – but jobs have not. This ‘jobless recovery’ has led economists to argue that unemployment has reached a point where it can fall no further without further inflation. This column disagrees, suggesting the nature of the crisis affects the nature of the recovery.
The Great Recession in the US has been followed by high and persistent unemployment. Although output recovered its pre-crisis level, the unemployment rate is still above its pre-crisis level, a situation that is popularly called ‘jobless recovery’ (see Figure 1).
Going separate ways? Differences in school-to-work pathways between Europe and the US
Glenda Quintini15 May 2012
Recent sizeable increases in youth unemployment are compromising the school-to-work transition of recent school graduates. This column uses optimal matching, a method borrowed from molecular biology, to study the transitions from school to work in Europe and the US. It argues the share of youth facing serious difficulties on the labour market is 18 percentage points smaller in the US than in Europe. In Europe, 30% of youth face difficulties settling into the labour market and another 15% are trapped in long-term unemployment or inactivity.
The recent global economic crisis has brought renewed attention to the difficulties faced by youth in the labour market, including high unemployment rates, the risk of long-lasting scars from poor employment outcomes right after leaving education and the resulting risk of social and economic exclusion (Annunziata 2012). Between December 2007 and March 2012, youth in both the US and Europe have suffered from sizeable increases in unemployment rates – 5 and 7.5 percentage points, respectively – compromising the school-to-work transition of recent school graduates.
Identity and wellbeing: How retiring makes the unemployed happier
Clemens Hetschko, Andreas Knabe, Ronnie Schöb04 May 2012
Most people’s wellbeing is permanently affected by unemployment. This column argues that the unhappiness is due to a loss of identity, rather than daily experiences. Using German data, it shows that the long-term unemployed become happier upon entering retirement, thus changing social category, even though this does not change their daily lives.
Most people adapt surprisingly well to changes in their lives. Even after tragic events such as the death of a family member or a chronic disease, they restore their former wellbeing, if not always completely (Clark et al 2008). There is one event, though, for which this appears not to be true – unemployment. Compared with other negative experiences, the life satisfaction of the unemployed does not restore itself even after having been unemployed for a long time.
Fiscal consolidation in reformed vs. unreformed labour markets
Alessandro Turrini25 April 2012
Most EU countries have embarked on a path of fiscal austerity. Would the employment impact of fiscal consolidation be more harmful if reforms liberalising the labour market were taken at the same time? This column argues that fiscal consolidations increase unemployment more in regulated labour markets because employment protection is associated with a stronger reduction in job creation.
Most EU countries have embarked on a path of fiscal austerity to ensure orderly debt developments at a juncture where unemployment is high and private-sector demand still weak. To what extent such consolidation programmes could compromise the recovery is object of current debate (see, notably, the debate launched by Giancarlo Corsetti 2012 on this website), although there is a certain consensus that for some countries the room of manoeuvre on the fiscal side is quite limited, in light of possible tensions on bond markets.
Much research has documented that unemployment makes people unhappy. But does unhappiness spur the unemployed to look harder for jobs? And if so, why do governments need to help them find work with active labour market policies? CEPR DP8842 finds that the unhappiest of the unemployed do search harder for jobs, but don’t find them faster – suggesting that even the most motivated jobseekers could benefit from activation policies.
The Spanish labour market: A very costly insider-outsider divide
Samuel Bentolila, Juan Dolado, Juan Francisco Jimeno 20 January 2012
Spain has a lower public debt-to-GDP ratio than not only Italy, but also France, Germany, and the UK. So why is it threatened with another downgrade? This column points to the fundamental problem with Spain’s economy – the insider-outsider divide that has led to the highest unemployment rate in the Eurozone. It proposes a single open-ended contract for all workers – a difficult solution whose time has come.
Despite having a public debt-to-GDP ratio that is lower not only than Italy’s but also than that of France, Germany, and the UK, and despite having a new government committed to fiscal consolidation, Spain is still in trouble. It faces difficulties obtaining credit in international financial markets. Aside from the unresolved restructuring of its banking sector, this situation has arisen mainly as a result of a lack of competitiveness and low expected economic growth.