Labour Mobility and Labour Market Adjustment in the EU

72 Pages Posted: 25 Jun 2016

See all articles by Alfonso Arpaia

Alfonso Arpaia

European Commission, Directorate General for Economic and Financial Affairs

Aron Kiss

European Union - European Commission

Palvolgyi Balazs

European Union - European Commission

Alessandro Turrini

European Commission; Centre for Economic Policy Research (CEPR)

Date Written: June 1, 2016

Abstract

This paper assesses macroeconomic determinants of labour mobility and its role in the adjustment to asymmetric shocks. First, the paper develops stylised facts of mobility at the national and sub-national levels in the EU. Then, it explores the macroeconomic determinants of bilateral migration flows. Econometric evidence suggests that labour mobility increases significantly when a country joins the EU. While euro area membership seems not to be associated with an overall rise in the magnitude of mobility flows, workers do appear more ready to move from countries where unemployment is high to those where it is lower. Thirdly, the paper looks at mobility as a channel of economic adjustment by means of a VAR analysis in the vein of Blanchard and Katz (1992). Results indicate that mobility absorbs about a quarter of an asymmetric shock within 1 year. Movements in response to shocks have almost doubled since the introduction of the euro. Real wages have also become more responsive to asymmetric shocks during the same period.

Keywords: Labour mobility; geographic mobility; migration; gravity; adjustment; asymmetric shocks; optimal currency areas; European Union.

JEL Classification: J61; J64

Suggested Citation

Arpaia, Alfonso and Kiss, Aron and Balazs, Palvolgyi and Turrini, Alessandro, Labour Mobility and Labour Market Adjustment in the EU (June 1, 2016). Centro Studi Luca d'Agliano Development Studies Working Paper No. 396, Available at SSRN: https://ssrn.com/abstract=2799736 or http://dx.doi.org/10.2139/ssrn.2799736

Alfonso Arpaia

European Commission, Directorate General for Economic and Financial Affairs ( email )

BU-1 05/190
Brussels, Bruxelles B-1049
Belgium

HOME PAGE: http://europa.eu.int/comm/economy_finance/index_en.htm

Aron Kiss

European Union - European Commission ( email )

Rue de la Loi 200
Brussels, B-1049
Belgium

Palvolgyi Balazs

European Union - European Commission ( email )

Rue de la Loi 200
Brussels, B-1049
Belgium

Alessandro Turrini (Contact Author)

European Commission ( email )

Office BU-10/113
B-1049 Brussels
Belgium
+32 2 299 5072 (Phone)
+32 2 299 3505 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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