Research Paper 20: Can labor mobility reduce imbalances in the eurozone?

The labor markets in the eurozone member states have developed very differently since the financial and economic crisis of 2008. The academic literature emphasizes labour mobility as an essential pillar for the functioning of currency areas. Using the CGE model PuMA, we quantitatively analyze the extent to which labor mobility can reduce imbalances. We come to the conclusion that it can at least temporarily reduce unemployment in the peripheral countries and strengthen wage development, while certain crowding-out effects occur in the core countries. For the eurozone as a whole, it improves the economic indicators. We conclude that while labor mobility can reduce imbalances somewhat, it cannot serve as a substitute for structural reforms.