Unemployment in Greece: A Survey of the Issues
IMF Working Papers, August 1, 1996
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Bibliographic details
- Authors: Dimitri G Demekas, Zenon Kontolemis
- Published: August 1, 1996
- Series: IMF Working Papers
Summary
- The Greek unemployment rate rose from 2 percent in the 1960s to 9-10 percent in the 1990s.
- Factors cited for the rise in unemployment:
- increase in female participation rates
- slowdown in growth
- restructuring of production
- increased mismatch between jobs and job seekers
- The paper identifies the most crucial factor as the persistence of real wage aspirations.
- The authors develop and test a model attributing persistent unemployment to:
- rapid expansion in the number of easy, life-time government jobs
- increase in the public/private wage differential during the 1980s
Key Findings and Evidence
- Historical unemployment trajectory:
- 2 percent in the 1960s
- 9-10 percent in the 1990s
- Structural and labor-market contributors include:
- female labor force participation increases
- sectoral restructuring of production
- mismatch between labor demand and supply
- Behavioral and institutional contributors emphasized:
- persistence of real wage aspirations
- labor market incentives from government employment and wage differentials
Model and Analytical Approach
- The paper develops and tests a model linking unemployment persistence to:
- expansion of easy, life-time government jobs
- widening public/private wage differential in the 1980s
- Conceptual mechanisms referenced in keywords and subject areas:
- demand shock, efficiency wage, employment equations
- inflation-unemployment curve / Phillips curve / inflation-unemployment locus
- unemployment-vacancy relationship, involuntary unemployment
- severance pay implications, private sector vs public sector dynamics
Policy-Relevant Implications (as implied by analysis)
- Reducing unemployment persistence may require addressing:
- incentives created by easy, life-time government jobs
- the public/private wage differential that widened during the 1980s
- mismatches between job seekers and available jobs through retraining or reallocation policies
- growth slowdowns that limit labor demand
- Labor force participation dynamics, notably female participation increases, should be considered in policy design