Great Recession impact on European labor markets integration: cluster analyses

The purpose of this paper is to assess the impact of the Great Recession (2008-2014) on the labor market profiles and integration process in the European Union (EU26) and in the 12 historical Eurozone countries.

This study assesses the impact of the crisis, and applies multivariate statistical methods containing a principal component analysis and an agglomerative hierarchical clustering. Two non-overlapping sub-periods are established: a pre-crisis (1999-2007) period and a crisis (2008-2014) period, and eight European indicators are considered.

The results are threefold. First, they bring strong evidence of a significant impact of the crisis on the process of integration. Second, they interestingly reveal more heterogeneity in the aftermath of the crisis across the EU countries, while more homogeneity across the Eurozone countries. Third, this apparent homogenization is accompanied by a polarization process into two main groups of countries including Spain, Portugal, Finland and the Netherlands in one group while the rest of the Eurozone in the other.

This study is unique as it does not only present a snapshot of the challenges posed by the Great Recession to the European Union and Eurozone labor market profiles, but it also assesses its impact on their integration process. In addition, using the, suitable yet ignored, multivariate statistical methods on the latest data to study such an impact is another contribution of this paper.