Dismal Employment Growth in EU Countries: The Role of Corporate Balance Sheet Repair and Dual Labor Markets

33 Pages Posted: 11 Sep 2013

See all articles by Bas Berend Bakker

Bas Berend Bakker

International Monetary Fund (IMF)

Li Zeng

International Monetary Fund (IMF)

Date Written: August 2013

Abstract

This paper argues that the large differences among EU countries in post-crisis employment performance are to a large extent driven by the need to adjust corporate balance sheets, which had greatly deteriorated during the boom years in some countries but not in others. To close the large gaps between saving and investment, firms reduced investment and cut costs to boost profits. With much of the cost adjustment falling on firms’ wage bills, employment losses were largest in countries under the most intense pressures to improve corporate profitability and with limited wage flexibility due to labor market duality.

Keywords: Labor markets, Europe, European Economic and Monetary Union, Employment, Corporate sector, Profits, Debt, Current account deficits, saving, firms, employment growth, unemployment, employment losses, labor productivity, temporary employment, recession, employment reductions, employment performance, unemployment increases, duration of unemployment, employment outcome, labor force, employment outcomes, unemployment rate, total employment, employment outlook, reductions in employment, employment declines, employment impact, reduction in employment, unemployment rates, employment data, number of employees, employment protection, structural unemployment, employment status

JEL Classification: E24, J30

Suggested Citation

Bakker, Bas Berend and Zeng, Li, Dismal Employment Growth in EU Countries: The Role of Corporate Balance Sheet Repair and Dual Labor Markets (August 2013). IMF Working Paper No. 13/179, Available at SSRN: https://ssrn.com/abstract=2324174

Bas Berend Bakker

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Li Zeng (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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