Effects of Labour and Product Market Regulation on Worker Flows: Evidence for the Euro Area Using Micro Data

37 Pages Posted: 3 Sep 2019

See all articles by Robert Anderton

Robert Anderton

European Central Bank (ECB)

Benedetta Di Lupidio

European Central Bank (ECB)

Date Written: September, 2019

Abstract

Macroeconomic studies suggest that employment-output elasticities in the euro area increased during the recovery from the crisis, especially in those countries that implemented reforms. In this paper, we use micro (individual-level) data from the Eurostat Labour Force Survey to investigate whether a similar change can be found at the micro level. We estimate the probabilities of worker flows across employment and unemployment in euro area countries during the period 2000-2015 in response to GDP growth, structural reforms and individual socio-demographic characteristics. We find evidence of a higher responsiveness of individual worker flows to output changes after the crisis, particularly for a group of countries which implemented significant reforms during the crisis. Indicators of labour and product market rigidities provide a statistically significant direct indication that such increased responsiveness may be explained by reforms. Finally, our results are not only driven by workers hired on temporary contracts, but also apply to permanent contracts.

Keywords: Great Recession, individual-level worker flows, labour market regulations, linear probability model, structural reforms

JEL Classification: J21, J24, C25, K31

Suggested Citation

Anderton, Robert and Di Lupidio, Benedetta, Effects of Labour and Product Market Regulation on Worker Flows: Evidence for the Euro Area Using Micro Data (September, 2019). ECB Working Paper No. 2312, Available at SSRN: https://ssrn.com/abstract=3446696

Robert Anderton (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany
0049 69 13440 (Phone)
0044 69 1344 6000 (Fax)

Benedetta Di Lupidio

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

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