On the Efficient Unemployment Rates in Europe
- 1 Department of Accounting and Finance, Hellenic Mediterranean University, Heraklion, Greece
- 2 School of Social Sciences, Hellenic Open University, Patras, Greece
- 3 Hellenic Scientific Institute on the Economics of Education & Life-Long Learning, Research and Innovation, Athens, Greece
- 4 Centre of Planning and Economic Research, Athens, Greece
- 5 Gulf One Lab for Computational & Economic Research, Lancaster University, Lancaster, UK
- 6 Department of Business Administration, National and Kapodistrian University of Athens, Athens, Greece
Abstract
Given the high historical records in employment and job vacancies, as well as the low historical records in unemployment rates in 2022, much has been said about the labor markets in Europe recently. In this paper, we investigate the condition of labor markets in European countries; examining whether European economies are at (near) full employment and more specifically, whether their labor markets are efficient, slack, or tight. To this purpose, the novel methodology of Michaillat and Saez (2022) is implemented, and we calculate the efficient unemployment rates u * . It appears that most of the 19 ex amined EU labor markets are persistently inefficiently slack over the whole sample period or below full employment. However, there are also a few exceptions as a couple of European countries have exhibited temporarily inefficiently tight labor markets, i.e. the labor market is over full employment. Finally, policy implications are provided to achieve efficiency in labor markets and close the unemployment gaps, focusing especially on tools from the supply side.
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