TITLE:
On the Efficient Unemployment Rates in Europe
AUTHORS:
George Agiomirgianakis, Georgios Bertsatos, George Sfakianakis
KEYWORDS:
Europe, Labor Markets, Unemployment, Vacancies
JOURNAL NAME:
Theoretical Economics Letters,
Vol.13 No.7,
December
28,
2023
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 examined 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.