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Europe's unemployment crisis : why especially high educated workers leave their labor markets.
(2013) Rauch, Kirsten Caroline; Urquiza, Juan; Soto, Raimundo; Fuentes San Martín, Rodrigo; Pontificia Universidad Católica de Chile. Instituto de Economía
In many European labor markets, frictions worsened in the aftermath of the Financial Crisis and are getting worse during the ongoing European debt crisis. As a consequence, unemployment rates have increased sharply, especially for low and medium educated workers in those countries that are worst hit by the crisis. Nevertheless, it is mostly high educated workers who decide to use their right of free movement inside the European Union (EU) and migrate. The search model provided will address the question of why it is especially high educated workers who leave their respective labor markets, although they face better conditions than their less educated co-workers. The numerical solution provided suggests that high educated workers have to give up a lower share of their leisure time while searching. In particular, under the baseline calibration, high educated workers have to give up one third of the time low educated workers have to give up when they search for a job, whether on one or the other labor market. This is why the high educated choose to migrate more often.