Intra-EU labour mobility dampens cyclical pressures

Analysis - January 2019 - No. 1

Authors Adolfsen, Jakob; Jensen, Rasmus Mose
Subject Current economic and monetary trends; Other economic analyses; EU area
Type Analysis
Year 2019
Published 10 January 2019
The enlargements of the EU led to large labour migration flows from Eastern to Western Europe which expanded the labour force considerably in several of the countries currently experiencing labour shortages. The analysis indicates that when the unemployment gap narrows by 1 percentage point, inflows of EU labour increase the labour force in an EU country by 0.1 per cent p.a. This has a certain countercyclical impact. Large income differences exist between Eastern and Western Europe. As a result, Western European firms are still able to attract EU labour during boom periods.