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Declining Job Reallocation in Europe: The Role of Shocks, Market Power, and Technology

Author

Listed:
  • Filippo Biondi

    (Düsseldorf Institute for Competition Economics)

  • Sergio Inferrera

    (Queen Mary University of London, School of Economics and Finance)

  • Matthias Mertens

    (Massachusetts Institute of Technology)

  • Javier Miranda

    (Halle Institute for Economic Research (IWH), Friedrich-Schiller University, and CompNet)

Abstract

We study changes in job reallocation in Europe after 2000 using novel micro-aggregated data that we collected for 19 European countries. In all countries, we document broad-based declines in job reallocation rates that concern most economic sectors and size classes. These declines are mainly driven by dynamics within sectors, size, and age classes rather than by compositional changes. Simultaneously, employment shares of young firms decline. Consistent with US evidence, firms’ employment has become less responsive to productivity shocks. However, the dispersion of firms’ productivity shocks has decreased too. To enhance our understanding of these patterns, we derive and apply a firm-level framework that relates changes in firms’ market power, labor market imperfections, and production technology to firms’ responsiveness and job reallocation. Using German firm-level data, we find that changes in markups and labor output elasticities, rather than adjustment costs, are key in rationalizing declining responsiveness.

Suggested Citation

  • Filippo Biondi & Sergio Inferrera & Matthias Mertens & Javier Miranda, 2025. "Declining Job Reallocation in Europe: The Role of Shocks, Market Power, and Technology," Jena Economics Research Papers 2025-004, Friedrich-Schiller-University Jena.
    • Handle: RePEc:jrp:jrpwrp:2025-0004
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    File URL: https://oweb.b67.uni-jena.de/Papers/jerp2023/wp_2025_004.pdf
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    More about this item

    Keywords

    Business dynamism; job reallocation; productivity; responsiveness of labor demand; market power; technology; European cross-country data;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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