The Role of Labor-Market Changes in the Slowdown of European Productivity
Ian Dew-Becker () and
Robert Gordon ()
Review of Economics and Institutions, 2012, vol. 3, issue 2
This paper is about the role of policy, institutions, and culture in creating a strong negative tradeoff between productivity and employment growth across groups of countries within Europe. Throughout the postwar era until 1995 labor productivity grew faster in Europe than in the United States. In the decade after 1995, productivity growth in the EU-15 slowed while that in the US accelerated. Europe’s productivity growth slowdown was largely offset by faster growth than the US in employment per capita, leaving little difference in growth of output per capita between the EU and US going back to 1980. We document the productivity-employment tradeoff in the raw data, in regressions that control for the two-way causation between productivity and employment growth, and we show that there is a robust negative correlation between productivity and employment growth across countries and time. We find that the negative effect of changes in employment per capita on changes in productivity is robust to alternative instruments and to the inclusion or exclusion of particular countries like Italy or Spain. We conclude by suggesting that evaluations of alternative policy reforms in Europe should take into account any offsetting effects on employment and productivity by examining the ultimate impact on changes in income per capita.
Keywords: productivity; employment; productivity-employment tradeoff; european stagnation; mediterranean economies; labor market flexibility; european policy reforms; participation of women (search for similar items in EconPapers)
JEL-codes: E0 E23 E24 E60 J20 J21 J23 (search for similar items in EconPapers)
References: Add references at CitEc
Citations: View citations in EconPapers (18) Track citations by RSS feed
Downloads: (external link)
Requires registration. Users must be registered and log in to access full text
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:pia:review:v:3:y:2012:i:2:n:1
Access Statistics for this article
Review of Economics and Institutions is currently edited by Carlo Andrea Bollino
More articles in Review of Economics and Institutions from Università di Perugia Contact information at EDIRC.
Bibliographic data for series maintained by Ubaldo Pizzoli ().