Crises and Employment-Productivity Dynamics: Insights from European Countries
This study examines the relationship between employment and productivity during economic crises in European countries. By analyzing business cycle theories, particularly the role of labor demand and productivity shifts, we identify specific points of crisis, termed "hips". Using economic data, we explore how these points influence labor utilization and productivity. Our findings reveal different adjustment patterns across countries, contrasting current responses with past crises, and highlighting policy implications for managing employment and productivity during economic downturns.
Crises and Employment-Productivity Dynamics: Insights from European Countries
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Presentation Transcript
Crises and Joint Employment-Productivity Dynamics: A Comparative Perspective for European Countries Enrico Marelli, Marcello Signorelli and JoannaTyrowicz
Motivation • Businesscycle theory: • any change in labor usage can be decomposed into • a movement along a marginal productivity schedule • and a shift of the schedule • Mulligan (2009) decomposes this differential for the current crisis and compares to the previous ones
Intuition • At the „hip” of the cycletwothingscoincide: • high demand for products • high demand for labour and high labourproductivity • Just after the „hip” demand no longerincreases => adjustmentsnecessary • either on labourdemand with unchangeddemand/productivityschedules • or on productivity – upwardshift of the demand/productivityschedules • Overlongerhorizon • adjustment of type (a) leads to permamentreduction in employment (tillnextpositivedemandshock) • adjustment of type (b) impliesgrowinglabourproductivity => efficiency and TFP
Outline • Method • Data • Findings • Conclusions
Method • Have to find a „hip” in the cycle… • … anchor on the „hip” the changes in productivity and employment • how to measureproductivity? • how to measureemployment? • At the end we expectrathercoherent: • shifts OF the demand/productivityschedules and • shifts ALONG the demand/productivityschedules • We do that for EU countries for as manycountries as thereis data
Method – step by step • Identify the boom and the bust • Findpeak and anchorthere • Computecummulatedchange of labouruse and productivity • Graphthem one against the other • Repeat for allcountries for allcycles
Method – 1. finding the hip • Short term and long term fluctuations - HP filter • Afterfilteringaway the trend – identifypeaks Second Third First ?
Method – 2. measuringproductivity and employment • Employment • Ideally: hoursworked in economy • Reality: not available for any of the EU countries • Working/employed/FTE – hugedifferences • Eventually: working, no FTE • Labourproductivity: • Essentially: output per hourworked • Reality: no output (GDP) no hoursworked (heads) • Eventually: GDP/working
Method – 3. link labourproductivity and employment • Refresh Mulligan • Nice RBC-coherentpattern • In reality for Europeaneconomies? ???
Results– groups of countries • Analysis revealsfewadjustmentpatterns in the lastcrisis • (a) a canonical RBC; • (b) reduced (or absent) change in employment and reductions in productivity; • (c) a contemporaneous reduction in both productivity and employment (profoundrecession); • (d) a growth or preservation of both employment and productivity. • Thesereactionsare not like in the past.
Group 1 – RBC consistent • Note: solid black line (late 2000s); dashed black line (late 1990s for Hungary and early 1990s for Spain)
Conclusions • We applied simpletool to seeifrecentcrisisis RBC type in Europe • We alsocompareit to previouscrises • Many of the past were RBC in nature • Now – onlyfewcountrieshave „adjustment” patterns as economistswouldlikeit • Policies to stop employmentadjustmentat the expense of productivity • Somecountries „on the safeside” evenif GDP contracts • Somecountries in deeprecession
