The Impact of Euro Adoption on Labour Markets in Central and Eastern Europe: A Comparative Analysis of Structural Changes and Employment Dynamics
The Impact of Euro Adoption on Labour Markets in Central and Eastern Europe: A Comparative Analysis of Structural Changes and Employment Dynamics

Summary/Abstract: This paper examines how the adoption of the euro has affected labour market outcomes in Central and Eastern Europe (CEE) from 2000 to 2023. We focus on four key dimensions: employment trends, unemployment dynamics, wage convergence, and labour productivity. Using panel data econometric techniques and drawing on data from ILOSTAT, Eurostat, national statistics, and scholarly studies, we provide empirical evidence on the labour market impacts of joining the euro area. The analysis situates these outcomes in the context of economic integration theory, particularly optimum currency area (OCA) criteria, which emphasize labour mobility and wage flexibility as adjustment mechanisms in a currency union. Our difference-in-differences and panel regression results indicate that euro adoption is associated with significant gains in labour productivity and continued convergence of wages, but it has a more nuanced effect on employment and unemployment, largely influencing the volatility of labour market cycles rather than long-run levels. The paper concludes with a discussion of policy implications, suggesting that while euro adoption can bolster economic integration and productivity, it requires supportive labour market institutions and policies to ensure positive employment outcomes and mitigate the short-term adjustment costs. These findings contribute to the broader literature on economic convergence and labour market adaptation in the context of European Monetary Union (EMU) enlargement.

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