Beyond eurosclerosis

BEYOND EUROSCLEROSISTITO BOERI & PIETRO GARIBALDI

Relazione di: Gerald Avondo, Luca Castelletti, Enrico Grigis, Matteo Foiadelli, Emilio Pirola, Paolo Viganò

Università degli studi di Bergamo - Corso di Politica economica, istituzioni, efficienza

18 Novembre 2010

1

Tito BoeriUniversità Bocconi, Milan, IGIER and Fondazione Rodolfo Debenedetti

Pietro GaribaldiUniversità

di Torino, Collegio Carlo Alberto, and Fondazione Rodolfo Debenedetti

2

MERCATO DEL LAVORO

3 problemi:

• eurosclerosi

Crescita senza occupazioneanni ’80 - 1994

aumento della mobilità risolve il problema

3

MERCATO DEL LAVORO

3 problemi:

• eurosclerosi

2 tipologie di lavoratori:• a tempo indeterminato, alta

protezione, benefici di disoccupazione (adulti)

• a tempo determinato, bassa protezione, assenza benefici

(giovani)

4

• mercato del lavoro duale

MERCATO DEL LAVORO

3 problemi:

• eurosclerosi


Percezione negativa del mercato del lavoro di

entrambe le categorie di lavoratori

5

• percezione dei lavoratori

MERCATO DEL LAVORO

possibile soluzione:

• flexicurity

trade-off fra la necessità di mobilità del mercato (flexibilty) e sicurezza

occupazionale (security)

6

SVILUPPO

• focus sulla disoccupazione ed evoluzione dal 1995 all’inizio della crisi odierna

• cause della riduzione della disoccupazione (mercato flessibile)

• riforme delle istituzioni che aumentano la flessibilità (regressione)

• riforme delle istituzioni che aumentano la flessibilità (analisi qualitativa)

• indagine sulle opinioni dei lavoratori

• flexicurity e conclusioni

• discussion

7

8

uno sguardo alla disoccupazione

DISOCCUPAZIONE

dal 1995/96 all’inizio della crisi attuale:

• 5 milioni di disoccupati in meno

• tasso di disoccupazione da 11% a 8%

• 21 milioni di nuovi posti di lavoro

• tasso di occupazione medio EU15 +6%

• totale delle ore di lavoro in Europa +13%

9

55% of EU unemployment was concentrated in these four countries at the end of

the period. This share could have been higher had Sweden and Finland, two ini-

tially low unemployment countries, not experienced a dramatic increase in unem-

ployment in the deep recession of the early 1990s. In the 1996–2006 period, the

countries that initially had the highest unemployment rates were the most successful

in reducing unemployment. By 2006 the share of unemployment in the Club-Med

had decreased to 45%. Overall, substantial progress was made not only in reducing

EU15 unemployment, but also its cross-country variation. These country dynamics

are also reported in Appendix A (Figure A1), where we plot the dynamics of the

unemployment rate in each European country.

The decline of mass unemployment in Europe was also associated with a reduc-

tion in the dispersion of unemployment rates within each country. In particular, the

cross-sectional standard deviation of unemployment rates across the regions of the

EU15 (defined according to the Nuts II classification) declined considerably after

1995, as a result of both less cross-country and less within-country variation in

Unemployment Rate

3

45

6

7

89

10

11

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

% o

f Lab

our

forc

e

EU15 US

0

1

2

3

4

5

6

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

% o

f Lab

our

forc

e

Long Term unemployment

EU15 US

(a)

(b)

Figure 1. Evolution of unemployment and long-term unemployment in theEU15 and in the US (as a fraction of the labour force)

Source: Eurostat, http://epp.eurostat.ec.europa.eu

414 TITO BOERI AND PIETRO GARIBALDI

55% of EU unemployment was concentrated in these four countries at the end of

the period. This share could have been higher had Sweden and Finland, two ini-

tially low unemployment countries, not experienced a dramatic increase in unem-

ployment in the deep recession of the early 1990s. In the 1996–2006 period, the

countries that initially had the highest unemployment rates were the most successful

in reducing unemployment. By 2006 the share of unemployment in the Club-Med

had decreased to 45%. Overall, substantial progress was made not only in reducing

EU15 unemployment, but also its cross-country variation. These country dynamics

are also reported in Appendix A (Figure A1), where we plot the dynamics of the

unemployment rate in each European country.

The decline of mass unemployment in Europe was also associated with a reduc-

tion in the dispersion of unemployment rates within each country. In particular, the

cross-sectional standard deviation of unemployment rates across the regions of the

EU15 (defined according to the Nuts II classification) declined considerably after

1995, as a result of both less cross-country and less within-country variation in

Unemployment Rate

3

45

6

7

89

10

11

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

% o

f Lab

our

forc

e

EU15 US

0

1

2

3

4

5

6

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

% o

f Lab

our

forc

e

Long Term unemployment

EU15 US

(a)

(b)

Figure 1. Evolution of unemployment and long-term unemployment in theEU15 and in the US (as a fraction of the labour force)

Source: Eurostat, http://epp.eurostat.ec.europa.eu


10

unemployment rates. This is another new development in Europe. Up to the mid-

1990s, the dispersion, notably the within-country variation, in unemployment rates was

on the rise. In the following 13 years, the EU15 countries became more homogenous

societies, at least judging by regional labour market disparities (Boeri, 2008).

The documented disappearance of mass unemployment throughout the EU can-

not be accounted for as a side effect of falling participation in the labour market.

Netherlands

Ireland

UKBelgium

PortugalDenmarkLuxembourg

SpainItalyFrance

GermanyGreece

Sweden

Finland

–50

510

0 20

Del

ta U

nem

ploy

men

t rat

e 19

85–1

995

1985-1995

10

Austria

0 20

Unemployment rate 1985

10

(a)

Netherlands

Ireland

UKBelgium

Portugal

Denmark

Spain

France

Germany

Greece

Sweden

Finland

Austria

–15

–10

–50

5

5 10 15 20 25Unemployment rate 1996

Del

ta U

nem

ploy

men

t rat

e 19

96–2

006 Luxembourg

(b)

Italy

1996-2006

Figure 2. Individual countries evolutions: 1985–95 and 1996–2006

Source: European Labour Force Survey.

BEYOND EUROSCLEROSIS 415







Netherlands

Ireland

UKBelgium


SpainItalyFrance

GermanyGreece

Sweden

Finland

–50

510

0 20

Del

ta U

nem

ploy

men

t rat

e 19

85–1

995

1985-1995

10

Austria

0 20


10

(a)

Netherlands

Ireland

UKBelgium

Portugal

Denmark

Spain

France

Germany

Greece

Sweden

Finland

Austria–1

5–1

0–5

05


Del

ta U

nem

ploy

men

t rat

e 19

96–2

006 Luxembourg

(b)

Italy

1996-2006




11







Netherlands

Ireland

UKBelgium


SpainItalyFrance

GermanyGreece

Sweden

Finland

–50

510

0 20

Del

ta U

nem

ploy

men

t rat

e 19

85–1

995

1985-1995

10

Austria

0 20


10

(a)

Netherlands

Ireland

UKBelgium

Portugal

Denmark

Spain

France

Germany

Greece

Sweden

Finland

Austria

–15

–10

–50

5


Del

ta U

nem

ploy

men

t rat

e 19

96–2

006 Luxembourg

(b)

Italy

1996-2006




12

Going beyond the headcount definition of employment, one can measure employ-

ment dynamics also in terms of working hours. Not surprisingly, total working hours

increased in Europe by 13% since 1995, a percentage increase very similar to that

experienced by working hours in the United States over the same period (Figure 4a).

As shown in Figure 4b, a quantitatively important feature of the increase in Euro-

pean working hours was the growth of part-time employment: its incidence in total

employment grew from 15% to 18% in Europe while it declined slightly in the Uni-

ted States. As a result, about one-third of the total growth in working hours in the

EU15 was accounted for by the increase in part-time employment (Table 2). The

Total working hours

230

240

250

260

270

280

290Total EU15 Total US Full Time EU15

Incidence of part time employment

10

11

12

13

14

15

16

17

18

19

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

United States EU15

(b)

(a)

Figure 4. Total working hours and incidence of part-time employment

Source: Eurostat, http://epp.eurostat.ec.europa.eu; OECD, http://stats.oecd.org/wbos/index.aspx


13










Total working hours

230

240

250

260

270

280



10

11

12

13

14

15

16

17

18

19

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

United States EU15

(b)

(a)













Total working hours

230

240

250

260

270

280



10

11

12

13

14

15

16

17

18

19

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

United States EU15

(b)

(a)




MIGLIORAMENTI QUALITATIVI

• aumento delle ore di lavoro e non solo del numero di persone

• riduzione lavoratori scoraggiati

• società più omogenea:

• fra diversi paesi

• all’interno dei paesi stessi

• incremento nell’utilizzo di forme di lavoro come il part-time

14

POSSIBILI SPIEGAZIONI

• invecchiamento della popolazione

• disoccupazione fra i giovani è più elevata

• invecchiamento della popolazione potrebbe abbassare disoccupazione

• analisi dividendo per classi di età

• la riduzione è trasversale a tutte le classi

• l’invecchiamento non spiega la riduzione

15


• flussi migratori

• Europa è stata interessata da rilevanti flussi migratori

• flussi migratori potrebbero alterare disoccupazione

• analisi dividendo per classi di provenienza geografica

• migrazioni non spiegano la riduzione

16

• invecchiamento della popolazione


• dinamica salariale 1995 - 2006 crescita salariale media intorno al 2,5% annuo in termini nominali (Unione

europea, 2008)

17


• costo del lavoro

•2000 - 2005 crescita media intorno al 3%

•dal 2005 crescita media intorno al 2,5%

18

• dinamica salariale


• produttività

1995 - 2006 la produttività cresce in quanto il clup (costo

del lavoro per unità di prodotto) in termini reali

diminuisce annualmente dello 0,5%

19

• dinamica salariale

• costo del lavoro

20

ma quale è la vera causa?

TURNOVER

•bassa mobilità•mercato del lavoro ingessato•lunghi periodi di disoccupazione

21

disoccupazione può calare per due motivi:

• diminuzione dei flussi in entrata nel bacino di disoccupati

TURNOVER

• aumento dei flussi in uscita dal bacino di disoccupati

•alta mobilità•mercato del lavoro oliato•brevi periodi di disoccupazione

22

disoccupazione può calare per due motivi:

• diminuzione dei flussi in entrata nel bacino di disoccupati

23

interval, we calibrate the average months in the last interval so as to match long-

term unemployment over a 10-year horizon.1

With the above caveats in mind, Figure 5 reports annual inflows and outflows

rates, as estimated from the OECD duration database, for the EU15 as a pro-

portion of the relative population at risk. In other words, the inflows rate st is

reported as a fraction of total employment while the outflow rate ft is reported

as a fraction of the total unemployed population. After having peaked during

the 1992–3 recession, unemployment inflows would seem to have stabilized at a

level significantly larger than the rates registered in the second half of the

1980s. Unemployment outflows also display an upward trend with the peak

being reached in 2001.

A quantitative characterization of the role played by unemployment inflows and

outflows in the decline of European unemployment can be obtained by following

the decomposition suggested by Petrongolo and Pissarides (2008). To do so, we

start by defining average unemployment in two decades, namely the 1985–95 and

the more recent 1996–2006 periods, that is, the same time intervals that were

1 The average duration is technically defined as Dt = Ri=15diwit where d1 = 0.5, d2 = 2, d3 = 4.5 and d4 = 9 while the weights

wit are provided by the database. The missing central interval d5 is obtained so that unemployment over a 10-year horizon

reasonably matches the steady state (ergodic) unemployment estimated in Table 7.

0.03000

0.03500

0.04000

0.04500

0.05000

0.05500

0.06000

0.06500

0.07000

0.07500

198519861987198819891990199119921993199419951996199719981999200020012002200320042005200620070.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

0.5

0.55

0.6

InflowsOutflows

Inflows, left scale

scaleOutflows, right

Figure 5. Proxy unemployment inflows (as a percentage of employment) andoutflows (as a percentage of unemployment)

Source: Estimates based on the OECD Unemployment Duration Database. See the text for details on themethodology to estimate unemployment inflows and outflows.


interval, we calibrate the average months in the last interval so as to match long-

term unemployment over a 10-year horizon.1

With the above caveats in mind, Figure 5 reports annual inflows and outflows

rates, as estimated from the OECD duration database, for the EU15 as a pro-

portion of the relative population at risk. In other words, the inflows rate st is

reported as a fraction of total employment while the outflow rate ft is reported

as a fraction of the total unemployed population. After having peaked during

the 1992–3 recession, unemployment inflows would seem to have stabilized at a

level significantly larger than the rates registered in the second half of the

1980s. Unemployment outflows also display an upward trend with the peak

being reached in 2001.

A quantitative characterization of the role played by unemployment inflows and

outflows in the decline of European unemployment can be obtained by following

the decomposition suggested by Petrongolo and Pissarides (2008). To do so, we

start by defining average unemployment in two decades, namely the 1985–95 and

the more recent 1996–2006 periods, that is, the same time intervals that were

1 The average duration is technically defined as Dt = Ri=15diwit where d1 = 0.5, d2 = 2, d3 = 4.5 and d4 = 9 while the weights

wit are provided by the database. The missing central interval d5 is obtained so that unemployment over a 10-year horizon

reasonably matches the steady state (ergodic) unemployment estimated in Table 7.

0.03000

0.03500

0.04000

0.04500

0.05000

0.05500

0.06000

0.06500

0.07000

0.07500

198519861987198819891990199119921993199419951996199719981999200020012002200320042005200620070.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

0.5

0.55

0.6

InflowsOutflows

Inflows, left scale

scaleOutflows, right

Figure 5. Proxy unemployment inflows (as a percentage of employment) andoutflows (as a percentage of unemployment)

Source: Estimates based on the OECD Unemployment Duration Database. See the text for details on themethodology to estimate unemployment inflows and outflows.


OUTFLOWS

• 85% del calo della disoccupazione dipende dall’aumento dei flussi in uscita

• l’indice di mobilità di shorrocks evidenzia un aumento della mobilità fra paesi

• aumento del job to job

• honeymoon effect

24

25

probability of leaving any state is zero, hence the trace is equal to the number

of states. The index is bound above from one when ‘stayer’ coefficients are not

larger than 1/S, a condition which is always satisfied in our estimated transition

matrices.

Figure 6 plots a weighted average (weights are provided by the national working

age populations) for the 11 countries of the EU15 listed above of our unemploy-

ment turnover estimates (within period unemployment inflows plus outflows over

the beginning of period unemployment stock) and scalar measures of mobility in

the 1995–2004 period, together with the evolution of the unemployment rate

for the same group of countries. The message is once more rather clear: unemploy-

ment declined in Europe at times in which the turnover of the unemployment pool

and the mobility across labour market states were increasing.

In order to complete our characterization of mobility patterns, we also pro-

vide in Table 4 alternative scalar measures of mobility in the periods 1985–95

and 1996–2004 for all countries in which this information is available. In partic-

ular, we display Shorrocks mobility indexes obtained by 3 · 3 matrices in the

two subperiods, even though in the first period the time coverage is more lim-

ited. Figure A3 in Annex A provides the time-series evolution of this measure in

the individual countries. As discussed above, due to the retrospective nature of our

data, some flows across participation margins may capture the subjective classifica-

tion of the labour market status in the initial period (for instance, some persons

declaring to have been unemployed one year earlier were actually already consid-

0.29

0.3

0.31

0.32

0.33

0.34

0.35

0.36

0.37

0.38

0.85

0.9

0.95

1

1.05

1.1

1.15

1.2

1.25

4

5

6

7

8

9

10

11

12

Average U rate (%)A

vera

geU

turn

over

(%)

Average

Mobility

Index(%

)

av_U_turnover av_U_rate av_Mobility Index av_U_rate

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Figure 6. Evolution of unemployment turnover and scalar measures of mobil-ity in a group of nine EU Member States

Notes: Weighted averages of the following EU countries have been considered for which micro-data fromELFS is available: Belgium, Denmark, Spain, Finland, France, Greece, Italy, Luxembourg and Portugal.Weights are pounded by the relative population shares.



probability of leaving any state is zero, hence the trace is equal to the number

of states. The index is bound above from one when ‘stayer’ coefficients are not

larger than 1/S, a condition which is always satisfied in our estimated transition

matrices.

Figure 6 plots a weighted average (weights are provided by the national working

age populations) for the 11 countries of the EU15 listed above of our unemploy-

ment turnover estimates (within period unemployment inflows plus outflows over

the beginning of period unemployment stock) and scalar measures of mobility in

the 1995–2004 period, together with the evolution of the unemployment rate

for the same group of countries. The message is once more rather clear: unemploy-

ment declined in Europe at times in which the turnover of the unemployment pool

and the mobility across labour market states were increasing.

In order to complete our characterization of mobility patterns, we also pro-

vide in Table 4 alternative scalar measures of mobility in the periods 1985–95

and 1996–2004 for all countries in which this information is available. In partic-

ular, we display Shorrocks mobility indexes obtained by 3 · 3 matrices in the

two subperiods, even though in the first period the time coverage is more lim-

ited. Figure A3 in Annex A provides the time-series evolution of this measure in

the individual countries. As discussed above, due to the retrospective nature of our

data, some flows across participation margins may capture the subjective classifica-

tion of the labour market status in the initial period (for instance, some persons

declaring to have been unemployed one year earlier were actually already consid-

0.29

0.3

0.31

0.32

0.33

0.34

0.35

0.36

0.37

0.38

0.85

0.9

0.95

1

1.05

1.1

1.15

1.2

1.25

4

5

6

7

8

9

10

11

12

Average U rate (%)A

vera

geU

turn

over

(%)

Average

Mobility

Index(%

)

av_U_turnover av_U_rate av_Mobility Index av_U_rate

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Figure 6. Evolution of unemployment turnover and scalar measures of mobil-ity in a group of nine EU Member States

Notes: Weighted averages of the following EU countries have been considered for which micro-data fromELFS is available: Belgium, Denmark, Spain, Finland, France, Greece, Italy, Luxembourg and Portugal.Weights are pounded by the relative population shares.



26

preted as hirings occurring without intervening unemployment or inactivity spells.

Clearly, the same caveats concerning unemployment turnover apply also to this

measure, which is likewise biased downwards because it neglects hirings resulting in

separations within the same month.

Figure 7 displays the weighted average of job-to-job shifts as a fraction of depen-

dent employment across all EU countries for which data are available. Once more,

we observe a rising trend mirroring the decline in unemployment. Lower un-

employment and higher mobility in Europe would seem to be two sides of the same

coin.

Overall, the European labour market landscape looks much different from the

sclerotic situation of the early 1990s: there is significantly more mobility and

notably more turnover in the unemployment pool. We also documented that the

increase in mobility occurred at times in which unemployment was declining. In

order to better characterize the implications of this higher mobility on unem-

ployment, we report in Table 5 the long-run unemployment levels that can be

predicted on the basis of our transition matrices and compare them with the

levels of unemployment prevailing before the global recession in the EU15 coun-

tries for which this information is available. Any transition matrix, when inter-

preted as a stochastic, first-order, Markov process governing the evolution of

unemployment, is indeed consistent with a level of unemployment (ergodic) that

is constant in the long run. Table 5 shows that in the 1996–2004 period 9

countries out of 11 had ergodic levels of unemployment lower than the actual

6%7%8%

9%10%11%12%

13%14%

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Job to job flows as % of total dependent employment U rates

Figure 7. Job-to-job shifts as a fraction of dependent employment in 9 EUcountries

Notes: Job-to-job shifts are obtained as difference between total hirings and inflows into employment. Datarefer to the following EU Member States for which micro-data is available: Belgium, Denmark, Spain, Fin-land, France, Greece, Italy, Luxembourg and Portugal. Weights are pounded by the relative populationshares.



preted as hirings occurring without intervening unemployment or inactivity spells.

Clearly, the same caveats concerning unemployment turnover apply also to this

measure, which is likewise biased downwards because it neglects hirings resulting in

separations within the same month.

Figure 7 displays the weighted average of job-to-job shifts as a fraction of depen-

dent employment across all EU countries for which data are available. Once more,

we observe a rising trend mirroring the decline in unemployment. Lower un-

employment and higher mobility in Europe would seem to be two sides of the same

coin.

Overall, the European labour market landscape looks much different from the

sclerotic situation of the early 1990s: there is significantly more mobility and

notably more turnover in the unemployment pool. We also documented that the

increase in mobility occurred at times in which unemployment was declining. In

order to better characterize the implications of this higher mobility on unem-

ployment, we report in Table 5 the long-run unemployment levels that can be

predicted on the basis of our transition matrices and compare them with the

levels of unemployment prevailing before the global recession in the EU15 coun-

tries for which this information is available. Any transition matrix, when inter-

preted as a stochastic, first-order, Markov process governing the evolution of

unemployment, is indeed consistent with a level of unemployment (ergodic) that

is constant in the long run. Table 5 shows that in the 1996–2004 period 9

countries out of 11 had ergodic levels of unemployment lower than the actual

6%7%8%

9%10%11%12%

13%14%

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Job to job flows as % of total dependent employment U rates

Figure 7. Job-to-job shifts as a fraction of dependent employment in 9 EUcountries

Notes: Job-to-job shifts are obtained as difference between total hirings and inflows into employment. Datarefer to the following EU Member States for which micro-data is available: Belgium, Denmark, Spain, Fin-land, France, Greece, Italy, Luxembourg and Portugal. Weights are pounded by the relative populationshares.



27

compiled by the OECD (averaging the gross replacement rates for two earning levels,

three family situations and three durations of unemployment), DGDPit is GDP growth,

TAXit is a measure of the tax wedge, PREGit is a measure of product market regulation

and INDit measures the share of workers in the manufacturing sector (as the secular

increase in the share of employment in the small business service sector is bound to

affect labour market flows) We also include country fixed effects (ai) and year dummies

(ct). The time period covered by these regression ranges from 1995 to 2004. In the

case of UBit, series are available only at two-year frequencies and have been inter-

polated in order not to reduce significantly the degrees of freedom.

The results of these regressions are reported in Tables 6 through 8. All regres-

sions include country and year dummies. Thus, they capture country-specific time-

series variation in the institutions. All regressions point to significant correlations

between mobility and institutions, generally in line with predictions from economic

theory. In particular, in the case of unemployment turnover (Table 6), the decline

in the generosity of unemployment benefits and the strictness of employment pro-

tection legislation are associated with an increase in the turnover of the unemploy-

ment pool in the EU. The coefficient on EPLit is negative and significant across

different specifications. Importantly, it holds for both components of EPL, fixed-

term and permanent contracts.

The same type of correlations are observed in the case of the mobility index

(Table 7). Finally, job-to-job shifts (Table 8) are negatively correlated with the

generosity of unemployment benefits while the negative effect of EPL is driven by

permanent contracts as it is not significant for temporary contracts.

Employment

Ah/lAl/l

A B C D

w

Wage

Figure 9. The honeymoon effect


28

HONEYMOON EFFECT

• mercato completamente flessibile (impresa 1):

• situazione di crisi: l’impresa mantiene un livello di occupazione strettamente necessario (punto A)

• situazione di boom: l’impresa espande il livello occupazionale (punto B)

• livello medio occupazionale: punto C

HONEYMOON EFFECT

• mercato duale (impresa 2):

• situazione di crisi: l’impresa mantiene solo i lavoratori a tempo indeterminato (punto C che coincide con il livello medio dell’impresa 1)

• situazione di boom: l’impresa assume inoltre i lavoratori necessari a tempo determinato (punto B)

• livello medio occupazionale (punto D)

29

30

quali cambiamenti delle istituzioni spiegano la mobilità?

ISTITUZIONI

• istituzioni che incidono significativamente sulla mobilità e sui flussi di disoccupazione:

• riduzione della protezione dei lavoratori

• riduzione dei benefici di disoccupazione

31

32

period for all countries for which these two measures are available over the

entire period. According to economic theory, these two institutions are the natu-

ral candidate for analysing the dynamics of European mobility. In particular,

reductions in employment protection are bound to increase both unemployment

inflows and outflows (Bentolila and Bertola, 1990). The relaxation of constraints

on the use of temporary contracts is also bound to increase mobility and job-to-

job flows. Most importantly, as was argued by Boeri and Garibaldi (2007) and

we highlight in Box 1, the relaxation of temporary contracts from a rigid labour

market is associated not only with an increase in mobility, but also with an

increase in labour demand. In other words, there is a positive relationship

between the liberalization of temporary contracts, the increase in mobility and

the increase in total employment, hence the reduction in unemployment

(Box 1).

2323

.524

24.5

2525

.5

Ave

rage

UB

Inde

x

1985 1990 1995 2000 2005

year

2.2

2.4

2.6

2.8

Ave

rage

EP

L O

vera

ll In

dex

_ _ _ Average EPL Overall Index (right-hand axis)

___ Average UB index

Figure 8. Evolution of the average UB and EPL indexes

Notes: (1) The average UB index is defined as the weighted average of the gross unemployment benefitreplacement rates for the only countries for which data are available: Austria, Finland, Germany, Swedenand United Kingdom. For further details, see OECD, ‘Benefits and wages: gross replacement rates’. (2) Theaverage Overall EPL strictness index is defined as the weighted average of the summary measures for regularand temporary contract workers of EU15. (3) Weights are based on total national population.

Source: OECD, http://www.oecd.org


period for all countries for which these two measures are available over the

entire period. According to economic theory, these two institutions are the natu-

ral candidate for analysing the dynamics of European mobility. In particular,

reductions in employment protection are bound to increase both unemployment

inflows and outflows (Bentolila and Bertola, 1990). The relaxation of constraints

on the use of temporary contracts is also bound to increase mobility and job-to-

job flows. Most importantly, as was argued by Boeri and Garibaldi (2007) and

we highlight in Box 1, the relaxation of temporary contracts from a rigid labour

market is associated not only with an increase in mobility, but also with an

increase in labour demand. In other words, there is a positive relationship

between the liberalization of temporary contracts, the increase in mobility and

the increase in total employment, hence the reduction in unemployment

(Box 1).

2323

.524

24.5

2525

.5

Ave

rage

UB

Inde

x

1985 1990 1995 2000 2005

year

2.2

2.4

2.6

2.8

Ave

rage

EP

L O

vera

ll In

dex

_ _ _ Average EPL Overall Index (right-hand axis)

___ Average UB index

Figure 8. Evolution of the average UB and EPL indexes

Notes: (1) The average UB index is defined as the weighted average of the gross unemployment benefitreplacement rates for the only countries for which data are available: Austria, Finland, Germany, Swedenand United Kingdom. For further details, see OECD, ‘Benefits and wages: gross replacement rates’. (2) Theaverage Overall EPL strictness index is defined as the weighted average of the summary measures for regularand temporary contract workers of EU15. (3) Weights are based on total national population.

Source: OECD, http://www.oecd.org


MODELLO ECONOMETRICO

• Y diverse misure di mobilità

• EPL misura di protezione dell’occupazione compilata dall’OECD

• UB misura dei benefici per i disoccupati compilato dall’OECD

• TAX misura del cuneo fiscale

• PREG misura di protezione del mercato del prodotto

• IND misura della quota di lavoratori nel settore manufatturiero

Now consider a two tier regime with a stock of permanent contracts. In partic-

ular, starting from the rigid setting (when the firm hires in point C), let the firm

enjoy ‘marginal flexibility’. We assume that unexpectedly the firm can hire and

fire workers on a temporary basis, but, at the same time, it cannot break the

existing stock of permanent contracts. In reality, such contracts do expire through

natural turnover, but for simplicity we assume that this possibility is not available

to the firm. Formally, the constraint on the stock of permanent workers corre-

sponds to an employment position at point C in the figure. A firm that has sud-

denly the option to hire temporary workers should exploit this possibility. In

good times the firm should hire temporary workers up to the optimal employ-

ment level in the frictionless regime, and dismiss such workers in bad times. In

other words, the firm in the two-tier regime will have average employment in

point D in the figure. This implies that a two tier regime leads to an increase in

mobility and in average employment, while average productivity falls. The latter effect

is linked to the law of diminishing returns.

Reductions in the generosity of non-employment benefits should increase flows across

employment and non-employment and will be considered as one of the determinants

of mobility. The tax wedge is another institution that has been often cited in the

literature as one of the determinants of unemployment and mobility. It generally

operates in conjunction with unemployment benefits in affecting labour supply

(Pissarides, 1998) and hence we should control for it. Product market regulations are

also bound to affect the elasticity of labour demand altering the effects on employ-

ment and unemployment of labour market institutions (Bertola and Boeri, 2002). In

order to control for these effects coming from the product market side, we include in

the set of regressors an index of product market regulation tabulated by the OECD,

which is decreasing in the degree of competition of product markets.

We test the effects of reforms on mobility using a multivariate setting. We ask to

what extent changes in employment protection legislation, unemployment benefits

and other institutional indicators are associated with changes in unemployment turn-

over, the mobility index, and estimated job-to-job shifts by combining cross-sectional

and time-series observations. Specifically, we run the following panel regressions:

Yit ! ai " ct " b1EPLit " b2UBit " b3DGDPit " b4TAXit " b5PREGit

" b6INDit " eit #1$where Yit is alternatively our measure for unemployment turnover, the Shorrocks

index of mobility and job-to-job shifts as a fraction of dependent employment for

country i at time t, EPLit is the measure of strictness of employment protection

legislation compiled by OECD (overall and separately for regular and temporary

workers), UBit is the summary measure of generosity of unemployment benefits also


Now consider a two tier regime with a stock of permanent contracts. In partic-

ular, starting from the rigid setting (when the firm hires in point C), let the firm

enjoy ‘marginal flexibility’. We assume that unexpectedly the firm can hire and

fire workers on a temporary basis, but, at the same time, it cannot break the

existing stock of permanent contracts. In reality, such contracts do expire through

natural turnover, but for simplicity we assume that this possibility is not available

to the firm. Formally, the constraint on the stock of permanent workers corre-

sponds to an employment position at point C in the figure. A firm that has sud-

denly the option to hire temporary workers should exploit this possibility. In

good times the firm should hire temporary workers up to the optimal employ-

ment level in the frictionless regime, and dismiss such workers in bad times. In

other words, the firm in the two-tier regime will have average employment in

point D in the figure. This implies that a two tier regime leads to an increase in

mobility and in average employment, while average productivity falls. The latter effect

is linked to the law of diminishing returns.

Reductions in the generosity of non-employment benefits should increase flows across

employment and non-employment and will be considered as one of the determinants

of mobility. The tax wedge is another institution that has been often cited in the

literature as one of the determinants of unemployment and mobility. It generally

operates in conjunction with unemployment benefits in affecting labour supply

(Pissarides, 1998) and hence we should control for it. Product market regulations are

also bound to affect the elasticity of labour demand altering the effects on employ-

ment and unemployment of labour market institutions (Bertola and Boeri, 2002). In

order to control for these effects coming from the product market side, we include in

the set of regressors an index of product market regulation tabulated by the OECD,

which is decreasing in the degree of competition of product markets.

We test the effects of reforms on mobility using a multivariate setting. We ask to

what extent changes in employment protection legislation, unemployment benefits

and other institutional indicators are associated with changes in unemployment turn-

over, the mobility index, and estimated job-to-job shifts by combining cross-sectional

and time-series observations. Specifically, we run the following panel regressions:

Yit ! ai " ct " b1EPLit " b2UBit " b3DGDPit " b4TAXit " b5PREGit

" b6INDit " eit #1$where Yit is alternatively our measure for unemployment turnover, the Shorrocks

index of mobility and job-to-job shifts as a fraction of dependent employment for

country i at time t, EPLit is the measure of strictness of employment protection

legislation compiled by OECD (overall and separately for regular and temporary

workers), UBit is the summary measure of generosity of unemployment benefits also


33

TURNOVER

• EPL significativo per contratti a tempo determinato e indeterminato

• correlazione negativa

• UB significativo


34

Some of the effects are also quantitatively sizeable. For instance, a reduction of

EPL of one point (e.g., moving a country like Spain to the level of Finland) by itself

implies an increase of the overall mobility index of 4 percentage points (Table 7),

albeit lower than what was observed in Table 4. The effects of changes in un-

employment benefits are smaller. For instance, a reduction of the generosity of

one point (e.g., moving Denmark slightly above Belgium) implies an increase in

unemployment turnover of 1.7% (Table 6).

Our estimates of Equation (1) assume that institutional variables are completely

independent of the mobility rate. One could argue that institutional changes took

place exactly in those countries that had low mobility in the mid-1990s. In other

words, one should take into account that institutions may be themselves endoge-

nous variables. This is a serious econometric issue. In order to properly address this

endogeneity problem, we would need a set of instruments for the institutional vari-

ables in the right-hand side of Equation (1). Unfortunately these instruments are

not readily available in the literature, and most of the cross-country regressions on

unemployment make the same exogeneity assumption implied by Equation (1). Our

assumption is indeed coherent with the mainstream literature in this respect.

Table 6. Fixed-effects panel regressions of unemployment turnover oninstitutions

Unemployment turnover

(1) (2) (3) (4) (5)

UnemploymentBenefit – OECD Index

)0.017***()3.102)

)0.018***()3.309)

)0.019***()3.586)

)0.014***()2.776)

)0.016***()3.065)

Employment ProtectionLegislation – OECD Index

)0.223***()3.149)

Employment ProtectionLegislation (Regular Empl.)– OECD Index

)0.260***()3.168)

)0.264***()3.242)

)0.070()0.770)

)0.069()0.765)

Employment ProtectionLegislation (TemporaryEmpl.) – OECD Index

)0.102***()2.839)

)0.092**()2.557)

)0.091***()2.673)

)0.120***()3.155)

GDP growth rate )0.024**()2.192)

)0.021*()1.911)

)0.023**()2.092)

)0.031***()2.899)

)0.034***()3.139)

Tax Wedge )1.675*()1.681)

1.149(0.983)

0.654(0.545)

Share Manufacturing Sectorover total employment

0.129***(4.063)

0.129***(4.067)

Product Market Regulation 0.091*(1.745)

Constant 2.344***(7.096)

2.712***(7.416)

3.398***(6.222)

)1.149()0.933)

)1.270()1.035)

Number of observations 160 160 160 160 158Adj. R squared 0.32 0.35 0.36 0.43 0.45

Notes: Including year dummies from 1985 to 2004. t-statistics in parentheses.



35

INDICE DI MOBILITÀ DI SHORROCKS

• EPL significativo per contratti a tempo determinato e indeterminato




36

While the overall effects of institutions on mobility appear fairly robust across

specifications, the results are less clear when we use our model to assess whether

institutions reduce specifically the transitions to and from unemployment. In partic-

ular, we tested whether the model of Equation (1) has similar implications when we

use as dependent variable the transition rates from employment to unemployment

and from unemployment to employment. The results are reported in Table 9 and

show that unemployment benefits and employment protection are often no longer

significant. However, EPL for regular contracts is negatively correlated with flows

from unemployment to employment.

Overall, our multivariate analysis suggests that labour market mobility, un-

employment turnover and partly job-to-job shifts in the EU15 were fostered by insti-

tutional reforms reducing the strictness of employment protection or the generosity

of unemployment benefits.

The next section analyses in more detail the nature of these reforms and dis-

cusses how they could have possibly affected labour market mobility. This analysis

will turn out to be useful in discussing future directions of reform as well as percep-

tions of Europeans regarding the evolution of their labour markets.

Table 7. Fixed-effects panel regressions of mobility indexes on institutions

Mobility index (3 · 3 matrix)

(1) (2) (3) (4)

Unemployment Benefit – OECDIndex

)0.004***()3.838)

)0.004***()3.840)

)0.003***()3.132)

)0.003***()3.002)

Employment Protection Legislation– OECD Index

)0.044***()3.225)

Employment Protection Legislation(Regular Empl.) – OECD Index

)0.025()1.570)

)0.026*()1.658)

)0.017()0.970)

Employment Protection Legislation(Temporary Empl.) – OECD Index

)0.022***()3.174)

)0.013*()1.712)

)0.013*()1.696)

GDP growth rate )0.000()0.099)

)0.000()0.032)

0.001(0.564)

0.001(0.426)

Tax Wedge )0.006***()3.229)

)0.006***()3.179)

)0.004**()2.108)

)0.003()1.291)

Product Market Regulation )0.031***()2.875)

)0.031***()2.897)

Share of Manufacturing Sector overtotal employment

0.006(0.007)

Constant 0.803***8.558)

0.810***(7.924)

0.832***(8.250)

0.641***(2.820)

Number of observations 167 167 165 165Adj. R-squared 0.45 0.46 0.49 0.49




37

SPOSTAMENTO JOB TO JOB

• EPL significativo solo per contratti a tempo indeterminato




38

4. WHICH REFORMS?

The regressions in the previous section used standard indicators aimed at measur-

ing the generosity of non-employment benefits and the strictness of employment

protection legislation. Such indicators, mainly compiled by the OECD, have the

great advantage of providing quantitative, time varying measures of labour market

institutions. In this section, we go beyond quantitative measures and try to under-

stand more deeply which type of reforms were indeed carried out and in which

countries during the last decade or so.

The main source of information on labour market reforms in this section is the

‘Social Policy Reform Inventory’ assembled by the Fondazione Rodolfo Debened-

etti. It draws on a variety of sources (including country economic reviews carried

out by OECD, Income Data Source studies, EC-MISSOC reports, etc.) and it

takes stock of reforms carried out in Europe in the field of non-employment benefits

(encompassing not only unemployment benefits, but also the various cash transfers

provided to individuals in working age) as well as employment protection. It

Table 8. Fixed-effects panel regressions of job-to-job flows on institutions

Yearly job-to-job flows as a percentage of total dependentemployment

(1) (2) (3) (4) (5)

Unemployment Benefit– OECD Index

)0.278()1.165)

)0.241()1.013)

)0.456*()1.917)

)0.461*()1.948)

)0.437*()1.827)

Employment ProtectionLegislation – OECDIndex

)3.413()0.989)

Employment ProtectionLegislation (RegularEmpl.) – OECD Index

)6.473()1.335)

)6.679()1.438)

)9.988*()1.915)

)10.956**()2.054)

Employment ProtectionLegislation (TemporaryEmpl.) – OECD Index

)1.148()0.652)

)0.655()0.387)

)0.458()0.271)

)0.891()0.484)

GDP growth rate )0.169()0.262)

)0.284()0.436)

)0.528()0.839)

)0.472()0.752)

)0.656()0.999)

Tax Wedge )1.531***()3.085)

)1.836***()3.390)

)1.908***()3.484)

Share Manufacturing Sectorover total employment

)2.617()1.372)

)3.045()1.559)

Product Market Regulation 3.024(0.947)

Constant 69.485***(4.396)

78.800***(4.275)

148.987***(5.174)

210.625***(3.952)

226.467***(4.150)

Number of observations 124 124 124 124 122Adj. R-Squared 0.11 0.12 0.20 0.22 0.22




39

INFLOWS & OUTFLOWS

• EPL non significativo

• UB non significativo

• EPL significativo solo per contratti a tempo indeterminato

• correlazione negativa con outflows

40

Table 9. Fixed-effects panel regressions of ‘Employment to Unemployment’ and of ‘Unemployment to Employment’transition probabilities on institutions

Flows Employment to Unemployment Flows Unemployment to Employment

(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)

Unemployment Benefit –OECD Index

0.014 0.014 0.026 0.019 0.016 0.148 0.123 0.099 0.124 0.172(0.740) (0.747) (1.409) (1.041) (0.873) (1.075) (0.932) (0.743) (0.926) (1.242)

Employment ProtectionLegislation – OECD Index

0.421 1.390(1.576) (0.720)

Employment Protection Legislation(Regular Empl.) – OECD Index

0.291 0.338 )0.189 )0.188 )6.316*** )6.413*** )4.592* )4.573*(0.933) (1.140) ()0.572) ()0.564) ()2.919) ()2.964) ()1.847) ()1.840)

Employment ProtectionLegislation (Temporary Empl.) –OECD Index

0.206 0.123 0.115 0.081 1.294 1.465 1.492 2.166*(1.505) (0.935) (0.904) (0.565) (1.363) (1.524) (1.559) (2.029)

GDP growth rate )0.179*** )0.181*** )0.163*** )0.142*** )0.149*** 0.319 0.448 0.410 0.340 0.442()4.274) ()4.278) ()4.020) ()3.593) ()3.613) (1.055) (1.527) (1.390) (1.142) (1.437)

Tax Wedge 0.138*** 0.067 0.058 )0.283 )0.037 0.116(3.939) (1.643) (1.353) ()1.108) ()0.121) (0.365)

Share Manufacturing Sector overtotal employment

)0.364*** )0.368*** 1.256 1.315()3.190) ()3.200) (1.465) (1.535)

Product Market Regulation 0.124 )2.268(0.631) ()1.547)

Constant 1.710 1.518 )3.924** 5.888 6.080* 22.051** 38.102*** 49.269*** 15.400 9.025(1.347) (1.075) ()2.038) (1.638) (1.65) (2.400) (3.892) (3.508) (0.570) (0.329)

Number of observations 167 167 167 167 165 167 167 167 167 165R squared 0.32 0.32 0.389 0.434 0.434 0.281 0.341 0.347 0.358 0.37



BEYOND

EUROSCLEROSIS

435

41

EVIDENZE EMPIRICHE

42

• EPL sono significative sia per i contratti a tempo determinato che per i contratti a tempo indeterminato

• la correlazione è negativa

• UB sono significativi

• la correlazione è negativa

• le modifiche sulle EPL sono più incisive

43

come si sono riformati i paesi europei?

RIFORME

• possibile classificazione delle riforme in base a:

• EPL / UB

• regolamentazione / deregolamentazione

• riforme strutturali / riforme parziali

44

EMPLOYMENT PROTECTION LEGISLATION

• riguarda:

• regole dei contratti a tempo indeterminato o determinato

• tempi di preavviso per il licenziamento

• giusta causa per il licenziamento

• licenziamenti collettivi

45

ITALIA

• pacchetto Treu (1997):

• legalizzazione agenzie interinali

• apprendistato fino a 4 anni


• epl ridotto solo per contratti a tempo determinato

46

SPAGNA

• riduzione della protezione del lavoro a tempo indeterminato

47

FRANCIA

• riduzione delle regole per il licenziamenti collettivi

48

GERMANIA

• politiche stop and go:

• riforme radicali in direzione opposta

• effetti nulli

49

UNEMPLOYMENT BENEFITS

• generosità dei sussidi

• durata dei sussidi

• criteri di accesso ai sussidi

• criteri di mantenimento dei sussidi

• politiche attive

50

DANIMARCA

• riduzione dei sussidi da 7 a 5 anni

• nonostante la riduzione rimane un mercato con elevata sicurezza

• modello del welfare state

51

ITALIA

• sussidio di disoccupazione ordinario

• da 6 a 7 mesi

• basso livello di protezione

52

UK

• riduzione dei sussidi da 12 a 6 mesi

• estremizzazione del modello di capitalismo anglosassone

53

54

cosa ne pensano i lavoratori?

55

perceptions throughout the institutional transformations documented in this paper.

The longest survey available is the European Working Conditions Survey2 carried out in

1995, 2000 and 2005 among employees in the EU15. Figure 10 shows how the

percentage of workers reporting to be satisfied with their working conditions

evolved over time. As shown by the figure, only in Germany (where unemployment

increased throughout the period) and in the UK (where unemployment declined

mildly), the percentage of respondents declaring to be satisfied significantly

increased over time.3

Job satisfaction in EU Countries (% of employees expressing satisfaction with their working

conditions)

50% 60% 70% 80% 90% 100%

Greece

Spain

Italy

Portugal

France

Sweden

Netherlands

Germany

Luxembourg

Belgium

Austria

UK

Ireland

Finland

Denmark

EU15

20051995

Figure 10. Job satisfaction

Source: European Working Conditions Surveys, http://www.eurofund.europa.eu

2 Details are available at www.eurofound.europa.eu/ewco/surveys.3 Similar results are obtained when we look at the European Community Household Panel, a longitudinal survey (tracking the same

individuals over time), which was unfortunately discontinued in 2001. The proportion of individuals ‘fully satisfied with labour

market conditions’ declined by one percentage point per year at exactly the same time that unemployment was improving.


SODDISFAZIONE DEI LAVORATORI

• breve periodo:

• insoddisfatti i precari

• soddisfatti i lavoratori a tempo indeterminato

• lungo periodo:

• insoddisfatti anche i lavoratori a tempo indeterminato

56

57

esiste una soluzione?

w ! rU "1# b$ % by % rF

where the wage is a weighted average between the worker’s outside option and

the productivity of the job y. The presence of firing costs, which negatively

affect the firm threat point in the bargaining problem, induces and increase in

wage. Using the above expression for the wage, the worker’s value reads

"r % d$W ! b"1# b$ % by % rF % dU : "2$

As shown by Equation (2), the value of employment is, via Nash bargaining,

increasing in both unemployment benefits, and firing taxes. Holding W con-

stant it is therefore possible to define a family of negatively sloped indifference

curves as those depicted in Figure 11 in the b, F space. In words, there is a

trade-off between generosity of unemployment benefits, parameterized by b,

and strictness of employment protection, parameterized by F. Reforms as those

discussed in Section 4 of the paper reduced both b and F, moving workers,

even those with a permanent contract, to a lower indifference curve, as indi-

cated by the dotted line in Figure 11.

From a normative standpoint, the documented increase in dissatisfaction of Euro-

pean workers carries with it some risk of reversal of the reforms that moved the

EU away from Eurosclerosis. Governments wishing to minimize such a risk should

probably think about exploiting the flexicurity trade-off, for example by extending

the coverage of unemployment benefits. Moving along the indifference curve of

b

F

w1

w0

Figure 11. The flexicurity tradeoff

Note: b is the generosity of unemployment benefits, F is the strictness of employment protection.


FLEXICURITY

• w = salario

• r = tasso di attualizzazione

• U = sussidi

•β = potere sindacale

• y = produttività del lavoro

• F = costo licenziamento

58

w ! rU "1# b$ % by % rF





"r % d$W ! b"1# b$ % by % rF % dU : "2$















b

F

w1

w0




w ! rU "1# b$ % by % rF





"r % d$W ! b"1# b$ % by % rF % dU : "2$















b

F

w1

w0




59

DISCUSSION

• ragionamento in equilibrio economico parziale e focalizzato esclusivamente sull’Europa

• riforme a rischio (Blanchard e Giavazzi)

• flexicurity molto costosa soprattutto in periodi di crisi

60

DISCUSSION

• insoddisfazione non dipende solo da mobilità ma anche dal salario (Barbara Petrongolo) e dagli effetti della globalizzazione (Francesco Caselli)

• manca un confronto con USA sull’eurosclerosi (Klaus Adams)

• non si considera il NAIRU (Daniel Leigh)

• assente ruolo e coordinamento del sindacato (Castelli e Menil)

• mercato del lavoro europeo non unitario (Georges de Menil)

61

DISCUSSION

• lavoro innovativo

• comparazione di mobilità e istituzioni fra paesi europei positiva (Petrongolo)

• focus su flussi e outflows (Petrongolo)

62

Beyond eurosclerosis

Education

Transcript of Beyond eurosclerosis