Fiscal consolidation in reformed and unreformed labour markets: A look at EU countries

Alessandro Turrini

No 462, European Economy - Economic Papers 2008 - 2015 from Directorate General Economic and Financial Affairs (DG ECFIN), European Commission

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 raise the share of 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.

Pages: 34 pages
Date: 2012-07
New Economics Papers: this item is included in nep-eec, nep-eur, nep-lab and nep-pbe
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Citations: View citations in EconPapers (4)

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Related works:
Working Paper: Fiscal Consolidation in Reformed and Unreformed Labour Markets: A Look at EU Countries (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:euf:ecopap:0462

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