Überblick
This study questions whether the increased European labour productivity is rather connected with labour-saving technology or if increased labour productivity leads to more labour input. For this purpose, the impact of technology and demand shocks on the growth rate of labour productivity, total hours worked and output are extracted by a structural vector autoregressive framework and analysed for 14 European countries, Japan and the United States. The dataset was received from the EU Klems. Whereas the countries show homogeneous responses to demand shocks, the results concerning the impact of a technology shock are ambiguous in this sample. Supporting the real business cycle theory, the response patterns of Ireland and Japan show a positive relationship between a technology shock and the total hours worked. For the remaining countries the opposite view, based on the theory of Jordi Galí, is found: A technology shock has a negative impact on employment. Regulation indicators for the labour market received from Nickell and Nunziata (2001), considered as potential barriers or supporters of the effects
of economic shocks, are checked in a linear regression on panel data with fixed effects. The estimated interaction terms of regulation and technology or demand shocks do not support the need of a general deregulation in the labour markets as long as every regulation index features a different effect on the shocks.