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LABOUR MARKET ADJUSTMENT IN EUROPE DURING THE CRISIS: MICROECONOMIC EVIDENCE FROM THE WAGE DYNAMICS NETWORK SURVEY

Mario Izquierdo

Banco de España

Juan Francisco Jimeno

Banco de España

Theodora Kosma

Bank of Greece

Ana Lamo

European Central Bank

Stephen Millard

Bank of England

Tairi Rõõm

Eesti Pank

Eliana Viviano

Banca d’Italia

 

Abstract

Against the backdrop of continuing adjustment in EU labour markets in response to the Great Recession and the sovereign debt crisis, the European System of Central Banks (ESCB) conducted the third wave of the Wage Dynamics Network (WDN) survey in 2014-15 as a follow-up to the two previous WDN waves carried out in 2007 and 2009. The WDN survey collected information on wage-setting practices at the firm level. This third wave sampled about 25,000 firms in 25 European countries with the aim of assessing how firms adjusted wages and employment in response to the various shocks and labour market reforms that took place in the European Union (EU) during the period 2010-13. This paper summarises the main results of WDN3 by identifying some patterns in firms’ adjustments and labour market reforms. It seeks to lay out the main lessons learnt from the survey in terms of both the general response of EU labour markets to the crisis and how these responses varied across the countries that took part in the survey.

 

JEL: E24, J30, J52, J68

Keywords: Wage Dynamics Network, Survey data, Labour market adjustment, Labour market reforms

Acknowledgements: The authors are extremely grateful to all the members of the Wage Dynamics Network for comments, help with the data and the interpretation of facts and country-specific institutions, and their efforts to compile the national databases that constitute the WDN3 database. They also thank Brian Hallissey and Eva Branten for their excellent research assistance. The views expressed in this paper are those of the authors and do not necessarily reflect those of their institutions.

 

Correspondence:

Theodora Kosma

Economic Analysis and Research Department

Bank of Greece,

21 E. Venizelos Ave.,

10250 Athens, Greece

Tel.: +30 210 320 2642

Email: tkosma@bankofgreece.gr


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