Macroeconomic Stability and the Single European Labor Market

16  April 2015    4:00 pm

Timo Baas, University of Duisburg-Essen

In cooperation with:
Research Centre International Economics (FIW) 


wiiw, Rahlgasse 3, 1060 Vienna, lecture hall (entrance from the ground floor)


Timo Baas

The Single European Labor Market is more and more seen as an instrument to face short-term challenges like diverging unemployment rates and asymmetric business cycles. Most labor economists, however, agree that the common labor market is far from completion even though migration increased strongly after EU-enlargement. It is, therefore, an open question to which extend this unfinished common market performs its function. In this paper, we analyze the impact of economic conditions on bilateral migration from Poland to Germany by estimating a two-country DSGE model using Bayesian methods. Our findings imply that migration, indeed, follows cyclical patterns and that it fosters economic stability. This, however, only holds true for the country of origin, as macroeconomic shocks of the destination country have a minor impact on migration.

Keywords: DSGE model, migration, open economy macroeconomics, Bayesian econometrics

JEL classification: F22, F41, E32