Labour mobility and labour market adjustment in the EU

an article by Alfonso Arpaia (Directorate General for Employment, Social Affairs and Inclusion, European Commission, Brussels) and Aron Kiss, Balazs Palvolgyi and Alessandro Turrini (Directorate General for Economic and Financial Affairs, European Commission, Brussels) published in IZA Journal of Migration Volume 5 Article 21 (2016)

Abstract

This paper assesses the role of labour mobility in the adjustment to asymmetric economic shocks in the EU.

After presenting a series of stylised facts of mobility in the EU, it assesses mobility as a channel of economic adjustment by means of a vector autoregression (VAR) analysis in the vein of Blanchard and Katz (BPEA 1:1–75, 1992).

Results indicate that, over the period 1970–2013, mobility absorbed about a quarter of an asymmetric shock within 1 year. Movements in response to shocks have almost doubled since the introduction of the euro. In contrast to previous papers on the labour market adjustment in the EU, the response of wages is integrated to the analysis.

It is found that real wages have also become more responsive to asymmetric shocks.

JEL Classification: J61, J64

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