Skip to main content

Geographic labour mobility and unemployment insurance in Europe

Abstract

Conventional wisdom suggests that the generous provision of UI in Europe can account for the low regional mobility rates. Emphasizing the disincentive effect, this hypothesis ignores that UI might also have a positive effect by relaxing liquidity constraints in the presence of mobility and search costs. This paper investigates empirically the effect of UI on geographic labour mobility for five European countries. Overall, the findings suggest that receiving benefits is not associated with lower mobility, and they indicate that the effects might vary depending on the institutional characteristics and the incentive structure of the UI system of each country.

This is a preview of subscription content, access via your institution.

References

  1. Ahn N, de la Rica S, Ugidos A (1999) Willingness to move for work and unemployment duration is Spain. Economica 66:335–357

    Article  Google Scholar 

  2. Algan Y, Cahuc P (2006) Civic attitudes and the design of labor market institutions: which countries can implement the Danish flexicurity Model? IZA Discussion Paper No. 1928

  3. Antolin P, Bover O (1997) Regional migration in Spain: the effect of personal characteristics and of unemployment, wage and house price differentials using pooled cross sections. Oxf Bull Econ Stat 59(2):215–235

    Article  Google Scholar 

  4. Atkinson A, Micklewright J (1991) Unemployment compensation and labor market transitions: a critical review. J Econ Lit 29(4):1679–1727

    Google Scholar 

  5. Barron J, Mellow W (1979) Search effort in the labour market. J Hum Resour 14(4):389–404

    Article  Google Scholar 

  6. Belot M, Ermisch J (2006) Friendship ties and geographic mobility: evidence from the BHPS. IZA Discussion Paper No. 2209

  7. Ben-Horim M, Zuckerman D (1987) The effect of unemployment insurance on unemployment duration. J Labor Econ 5(3):386–390

    Article  Google Scholar 

  8. Bertola G (2000) Labor markets in the European Union. Ifo Stud 1:9–122

    Google Scholar 

  9. Bertola G, Ichino A (1995) Wage inequality and unemployment: US vs. Europe. In: Bernanke B, Rothemberg J (eds) NBER macroeconomic annual. MIT Press, Cambridge

    Google Scholar 

  10. Bertola G, Jimeno JF, Marimon R, Pissarides C (2000) EU welfare systems and labour markets: diverse in the past, integrated in the future. In: Bertola G, Boeri T, Nicolleti G (eds) Welfare and employment in a United Europe. MIT Press, Cambridge

    Google Scholar 

  11. Bertola G, Foellmi R, Zweimüller J (2006) Income distribution in macroeconomic models. J Econ 89(2):187–190

    Article  Google Scholar 

  12. Blanchard O, Katz L (1992) Regional evolutions. Brookings Pap Econ Act 1:1–74

    Article  Google Scholar 

  13. Chamberlain G (1980) Analysis of covariance with qualitative data. Rev Econ Stud 47(1):225–238

    Article  Google Scholar 

  14. Da Vanzo J (1978) Does unemployment affect migration? Evidence from micro data. Rev Econ Stat 60(4):504–514

    Article  Google Scholar 

  15. Decressin J, Fatas A (1995) Regional labor market dynamics in Europe. Eur Econ Rev 39(9):1627–55

    Article  Google Scholar 

  16. European Commission (2001) High Level Task Force on Skills and Mobility, Final report, Brussells

  17. Goss E, Paul C (1986) Age and work experience in the decision to migrate. J Hum Resour 21(3):397–405

    Article  Google Scholar 

  18. Goss E, Paul C (1990) The impact of unemployment insurance benefits on the probability of migration of the unemployed. J Reg Sci 30(3):349–358

    Article  Google Scholar 

  19. Greenwood MJ (1997) Internal migration in developed countries. In: Rosenzweig MR, Stark O (eds) Handbook of population and family economics. Elsevier North-Holland, Amsterdam, pp 647–720

    Google Scholar 

  20. Hassler J, Mora J, Storesletten K, Zilibotti F (2005) A positive theory of geographical mobility and social insurance. Int Econ Rev 46(1):263–303

    Article  Google Scholar 

  21. Henley A (1998) Residential mobility, housing equity and the labour market. Econ J 108(2):414–427

    Article  Google Scholar 

  22. Herzog HW Jr, Schlottmann AM, Boehm TP (1993) Migration as spatial job-search: a survey of empirical findings. Reg Stud 27(4):327–340

    Article  Google Scholar 

  23. Hughes G, McCormick B (1981) Do council house policies reduce migration between regions. Econ J 91:919–937

    Article  Google Scholar 

  24. Jimeno JF, Bentolila S (1998) Regional unemployment persistence (Spain, 1976–1994). Labour Econ 5(1):25–51

    Article  Google Scholar 

  25. Lippman SA, McCall JJ (1979) Studies in the economics of search. North Holland, Amsterdam

    Google Scholar 

  26. Mortensen D (1977) Unemployment insurance and job search decisions. Ind Labor Relat Rev 30(3):505–517

    Article  Google Scholar 

  27. Mundlack Y (1978) On the pooling of time series and cross-sectional data. Econometrica 46(1):69–86

    Article  Google Scholar 

  28. OECD (2000) Employment outlook. OECD, Paris

    Google Scholar 

  29. Pedersen P, Smith N (2002) Unemployment traps: do financial disincentives matter. Eur Sociol Rev 18(3):271–288

    Article  Google Scholar 

  30. Pissarides C, Wadsworth J (1989) Unemployment and the inter-regional mobility of labour. Econ J 99:739–755

    Article  Google Scholar 

  31. Spilimbergo A, Ubeda LA (2004) Family attachment and the decision to move by race. J Urban Econ 55(3):478–497

    Article  Google Scholar 

  32. Tannery F (1983) Search effort and unemployment insurance reconsidered. J Hum Resour 18(3):432–440

    Article  Google Scholar 

  33. Tatsiramos K (2008) Unemployment insurance in Europe: unemployment duration and employment stability. Journal of the European Economic Association (in press)

  34. Wasmer E, Fredriksson P, Lamo A, Messina J, Peri G (2006) The macroeconomics of education. In: Brunello G, Garibaldi P, Wasmer E (eds) Education and training in Europe. Oxford University Press, UK

    Google Scholar 

  35. Wooldridge JM (2002) Econometric analysis of cross section and panel data. MIT Press, Cambridge

    Google Scholar 

Download references

Acknowledgement

I wish to thank Andrea Ichino, Karl Schlag, Jan van Ours, Frank Vella, and three anonymous referees for their suggestions and comments, which helped to improve the paper. This paper has also benefited from discussions with Gosta Esping-Andersen, Dimitris Georgarakos, David Jaeger, Ludovic Renou, Prodromos Vlamis, seminar participants at the European University Institute, Pompeu Fabra, EEA Summer School 2003 in London, ESPE 2004 in Bergen, and EPUNet 2004 in Berlin. The usual disclaimer applies. Financial support from the European University Institute, the Greek State Scholarship Foundation (IKY), and the CentER at Tilburg University as a Marie Curie Training Site under contract HPRN-CT-2000-00134 are greatly acknowledged.

Author information

Affiliations

Authors

Corresponding author

Correspondence to Konstantinos Tatsiramos.

Additional information

Responsible editor: Klaus F. Zimmermann

Appendix

Appendix

The Unemployment Insurance System

Table 10 shows the main characteristics of the UI system in each country. There are mainly two schemes of unemployment benefits, unemployment insurance, and unemployment assistance. Unemployment insurance is the main scheme under which those who are eligible receive compensation in the event of entry into unemployment. Eligibility is based upon previous employment and contribution histories, which implies that it does not cover all the unemployed. Unemployment assistance is not available in all countries. It is generally means tested and it is usually available for those who exhaust unemployment insurance and those who are not eligible. No distinction is made between unemployment insurance and assistance as such information is not available in the data. Following Bertola et al. (2000), the European countries can be classified as follows: (1) the Nordic (Denmark) and the Continental countries (France, and Germany), which provide generous benefits; (2) the Anglo-Saxon countries (e.g. United Kingdom), which provide flat rate payments with relatively short duration, and (3) the southern European countries (e.g. Greece, Italy and Spain), which have welfare states that were developed recently and provide limited unemployment insurance, although Spain resembles more to the Continental countries.

In particular, for the UK, the flat rate corresponds to a replacement rate of about 30%, which is about half to one third of the replacement rate in France, Germany and Spain. Duration of UI varies by employment record (France, Germany and Spain), and/or by age (France and Germany). France has the highest UI benefit duration (up to 60 months), but the payment is decreasing every 4 months, while Denmark has the highest replacement rate, 90%, of the reference earnings.

Table 10 Unemployment benefits in selected European countries
Table 11 Description of variables

Rights and permissions

Reprints and Permissions

About this article

Cite this article

Tatsiramos, K. Geographic labour mobility and unemployment insurance in Europe. J Popul Econ 22, 267–283 (2009). https://doi.org/10.1007/s00148-008-0194-7

Download citation

Keywords

  • Mobility
  • Unemployment insurance

JEL Classification

  • J61
  • C23
  • C25