Dismal Employment Growth in EU Countries : The Role of Corporate Balance Sheet Repair and Dual Labor Markets

Author/Editor: Bas B. Bakker ; Li Zeng
Publication Date: August 15, 2013
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
Summary: This paper argues that the large differences among EU countries in post-crisis employment performance are to a large extent driven by the need to adjust corporate balance sheets, which had greatly deteriorated during the boom years in some countries but not in others. To close the large gaps between saving and investment, firms reduced investment and cut costs to boost profits. With much of the cost adjustment falling on firms’ wage bills, employment losses were largest in countries under the most intense pressures to improve corporate profitability and with limited wage flexibility due to labor market duality.
Series: Working Paper No. 13/179
Subject(s): Labor markets | Europe | European Economic and Monetary Union | Employment | Corporate sector | Profits | Debt | Current account deficits

Publication Date: August 15, 2013
ISBN/ISSN: 9781484311639/1018-5941 Format: Paper
Stock No: WPIEA2013179 Pages: 32
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