Did the Pattern of Aggregate Employment Growth Change in the Euro Area in the Late 1990s?

50 Pages Posted: 16 Nov 2004

See all articles by Gilles Mourre

Gilles Mourre

European Union - European Commission

Date Written: May 2004


The paper examines whether the pattern of growth in euro area employment seen in the period 1997-2001 differed from that recorded in the past and what could be the reasons for that. First, a standard employment equation is estimated for the euro area as a whole. This shows that the lagged impact of both output growth and real labour cost growth, together with a productivity trend and employment inertia, can account for most of the employment developments between 1970 and the early 1990s. Conversely, these traditional determinants can only explain part of the employment development seen in recent years (1997-2001). Second, the paper shows sound evidence of a structural break in the aggregate employment equation in the late 1990s. Third, the paper provides some tentative explanations for this change in aggregate employment developments, using in particular country panels of institutional variables and of active labour market policies but also cross-sectional analyses. Among the relevant factors likely to have contributed to rising aggregate employment in recent years are changes in the sectoral composition of euro area employment, the strong development of part-time jobs, lower labour tax rates and possibly less stringent employment protection legislation and greater subsidies to private employment.

Keywords: Euro area, aggregate employment, demand for labour, labour market institutions, active labour market policies

JEL Classification: C2, E24, H50, J23

Suggested Citation

Mourre, Gilles, Did the Pattern of Aggregate Employment Growth Change in the Euro Area in the Late 1990s? (May 2004). Available at SSRN: https://ssrn.com/abstract=533027

Gilles Mourre (Contact Author)

European Union - European Commission ( email )

Rue de la Loi 200
Brussels, B-1049

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