On the significance of labour reallocation for European unemployment: Evidence from a panel of 15 countries

Abstract

We explore the macroeconomic effects of sectoral shifts for 15 European countries. An extensive panel is constructed that allows us to assess the impact of labour reallocation on unemployment in the European context. Indexes of labour market turbulence based on alternative sectoral disaggregation are constructed. The effect of labour reallocation on unemployment is found to be positive and significant in all specifications. This remains robust when we take into account volatility measures in the model.