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.

Chapter 5: The Determinants of Labour Force Participation in the European Union

Véronique Genre, Ramón Gómez-Salvador, Véronique Genre, Ramón Gómez-Salvado and Ana Lam

Subjects: economics and finance, labour economics


1 Véronique Genre, Ramón Gómez-Salvador and Ana Lamo INTRODUCTION In 2000 and 2001 the Lisbon and Stockholm Councils set three ambitious targets for employment policy in Europe over the following ten years. By 2010, employment rates in the European Union should be raised to an average 70 per cent for the working age population as a whole, to 60 per cent for women and 50 per cent for older workers. According to Eurostat (2001) estimates, these targets imply an increase in employment of about 20 million people, drawing not only from those who are currently unemployed, but also from the 76 million people aged between 15 and 64 who are currently not actively participating in the labour market, the so-called ‘inactives’.2 To achieve the Lisbon and the Stockholm targets, the EU is facing the major challenge of attracting these inactives into the labour force. The evolution of the labour force is determined by demographic developments and participation behaviour.3 Demographic developments could influence the labour force directly by driving the growth of working age population, and indirectly by affecting the age composition of the working age population and contributing to lowering or increasing the relative share of specific age groups with a certain participation behaviour. A recent study by Genre and Gómez-Salvador (2002) however shows that demographic developments have not played a major role in labour force developments over the last two decades in the euro area. Rather, participation behaviour, which depends on economic...

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