Labour Supply and Incentives to Work in Europe

Labour Supply and Incentives to Work in Europe

Edited by Ramón Gómez-Salvador, Ana Lamo, Barbara Petrongolo, Melanie Ward and Etienne Wasmer

Labour Supply and Incentives to Work in Europe highlights recent developments in the labour supply in Europe and gives a detailed assessment of their link with economic policies and labour market institutions. Despite major changes in European labour supply during the past few decades, the existing literature still lacks a comprehensive study of the relationship between labour supply and labour market institutions from a macro perspective.


Javier Ortega

Subjects: economics and finance, labour economics


Javier Ortega This chapter has two main empirical motivations. First, it aims at modelling the transition to employment of individuals who declare themselves not to be searching for a job but who find one. This is particularly the case for students and individuals looking after their family. This observed transition has two possible interpretations. One interpretation is to consider that the individual goes from inactivity to unemployment and then to employment but that we cannot observe all these transitions since the survey questions are not asked ‘frequently enough’. Alternatively, the individual may have received a spontaneous offer (the ‘man in the pub’ hypothesis). The second empirical motivation of the chapter is to explain the evolution of the UK labour market between 1994 and 2000, which simultaneously experienced (i) a decline of the unemployment rate, (ii) a moderate reduction of the inactivity rate, and (iii) no change in wages (a low ‘wage pressure’). More precisely, the question addressed by the authors is that of determining which plausible shock(s) can explain this evolution. For that purpose, Andrew Brigden and Jonathan Thomas set up a matching model with search intensity à la Pissarides (2000). The economy is composed of two types of individuals. The first group is that of the ‘high effort searchers’, whose intrinsic characteristic is to have a low valuation of non-market activities. As a result, these individuals are ‘unemployed’ whenever they are non-employed. The second group is that of the ‘low effort searchers’, who are characterized by...

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