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.


Barbara Petrongolo

Subjects: economics and finance, labour economics


Barbara Petrongolo This chapter empirically studies recent trends in labour force participation in the European Union. There have been several important developments in labour force participation in Europe over the last three decades. Among these, the most remarkable is the rising participation of women, from a 46 per cent EU average in 1976 to 62 per cent in 2002, followed by falling participation of both men (from 85 to 80 per cent) and youths (from 54 to 47 per cent). This chapter looks at the role of economic indicators and several labour market institutions in shaping these trends during the 1980s and 1990s. In particular, the authors estimate the determinants of participation for five demographic groups, namely youths, prime-age men and women, and older men and women. They find that the generosity of the unemployment benefit system, the strictness of employment protection, and union density tend to be associated with lower participation rates of groups with presumably lower labour market attachment such as women and older workers. Although establishing causality is a delicate matter, this chapter provides an interesting description of recent participation trends in the EU. The chapter fits in the recent macroeconomic literature on ‘employment and institutions’, which regresses aggregate labour market indicators on a number of economic and institutional factors using country-level panel data. As there is typically insufficient within-country variation in the labour market institutions usually considered, this literature aims at estimating the impact of institutions on, say, unemployment or participation, by exploiting their...

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