How do institutions affect the labour market adjustment to the economic crisis in different EU countries?

The economic crisis which began in most European countries in mid-2008 has had severe effects on labour markets. Although no country has escaped the crisis, the extent of output losses and the number of jobs lost, as well as the resulting rise in unemployment, vary considerably between countries. In order to shed light on this issue, this paper examines empirically how the current economic crisis has affected the different European economies in terms of the impact on output, and the knock-on effects, influenced by the specific institutional frameworks, on employment and unemployment.

On the basis of comparable quarterly Eurostat data the differences between countries in terms of the way that the loss of output is translated into falls in working hours and head-count employment and rises in unemployment are analysed. A range of institutional factors expected to influence the transmission from output to employment and unemployment is examined for a selected group of four countries (Germany, the United Kingdom, Denmark and Spain).