Does joining the European monetary union improve labor productivity? A synthetic control approach

Hong Zhuang, Miao Grace Wang (), Imre Ersoy and Mesut Eren
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Hong Zhuang: Indiana University South Bend
Miao Grace Wang: Dr. E.J. and Margaret O’Brien Hall, Marquette University
Imre Ersoy: Marmara University
Mesut Eren: Marmara University

Journal of Productivity Analysis, 2023, vol. 59, issue 3, No 6, 287-306

Abstract: Abstract We adopt the innovative synthetic control method (SCM) to study the causal effect of joining the European Monetary Union (EMU) on member countries’ labor productivity. Comparing labor productivity between members and their synthetic counterparts, we find that Belgium, France, Germany, Ireland, Italy, and the Netherlands experienced significant labor productivity gains from the eurozone membership. Our results are robust to a series of sensitivity checks. We also observe similar effects of EMU on members’ total factor productivity (TFP). Furthermore, we explore potential channels through which a monetary union can influence members’ labor productivity. Our results show that business cycle synchronization with other members and similar labor market institutions to other members contribute to an EMU country’s labor productivity gains.

Keywords: Labor Productivity; Eurozone; European Monetary Union; Synthetic Control Method (search for similar items in EconPapers)
JEL-codes: C21 E24 E65 F33 F66 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s11123-023-00668-1

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