Abstract
To solve the European unemployment problem, economists have usually advocated reforms that reduce labour market rigidities, which to increase the cost of labour: such reforms include less generous unemployment benefits, reductions in minimum wages and more flexible employment protection provisions. These recommendations are based on a cornerstone of modern economic theory: the notion of an “equilibrium rate of unemployment” to which the labour market converges in the absence of shocks, once all prices and wages have adjusted. This view holds that the equilibrium rate is entirely determined by real frictions at the microeconomic level, such as the workers’ bargaining power, information and incentive problems at the firm level, the efficiency of job search, etc. While these parameters themselves depend on the above-mentioned institutions, they do not depend on short-run fiscal and monetary policies, which only have a transitory effect on employment.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
References
Barrell, R. and V. Genre (1999) “Labour Market Reform in the UK, Denmark, New Zealand and the Netherlands,” National Institute of Economic and Social Research, http://www.niesr.ac.uk/staff/rbarrell/LMP1999.pdf.
Bentolila, S. and J. Dolado (1994) “Labour Flexibility and Wages: Lessons from Spain,” Economic Policy, 18, 53–99.
Blanchard, O. and T. Philippon (2003) “The Decline of Rents, and the Rise and Fall of European Unemployment,” mimeo, Massachusetts Institute of Technology.
Blanchard, O. and L. Summers (1986) “Hysteresis and the European Unemployment problem,” NBER Macroeconomics Annual.
Blanchflower, D. and R. Freeman (1993) “Did the Thatcher Reforms Change British Labour Market Performance?” CEP Discussion Papers no. 0168, Center for Economic Performance LSE.
Calmfors, L. (1985) “Work Sharing, Employment and Wages,” European Economic Review 27, 293–310.
Calmfors, L. and B. Holmlund (2000) “Unemployment and Economic Growth: A Partial Survey,” Swedish Economic Policy Review 7, 107–54.
Calmfors, L., A. Forslund and M. Hemström (2001) “Does Active Labour Market Policy Work? Lessons from the Swedish experiences,” Swedish Economic Policy Reviews, 61–124.
CEEP (2000) “Development of the Public Enterprises in Sweden,” The Swedish National Chapter to the CEEP Statistical Survey 2000.
Crépon, B. and F. Kramarz (2002) “Employed 40 Hours or Not-Employed 39: Lessons from the 1982 Mandatory Reduction of the Workweek,” Journal of Political Economy 110(6), 1355–89.
European Commission (2003) European Economy, Statistical Annex, Autumn 2003.
European Economic Advisory Group at CESifo (2003) Report on the European Economy 2002, CESifo, Munich.
Gersbach, H. and A. Schniewind (2001) “Awareness of General Equilibrium Effects and Unemployment,” IZA Working Paper no. 394.
Hunt, J. (1999) “Has Work-Sharing Worked in Germany?” Quarterly Journal of Economics 114(1), 117–48.
Joint Forecast of the Economic Research Institutes (Fall 2003) “Die Lage der Weltwirtschaft und der deutschen Wirtschaft im Herbst 2003,” ifo Schnelldienst 56(20), 3–41.
Laroque, G. and B. Salanié (2000) “Une décomposition du non emploi en France,” Economie et statistique 331(1), 47–66.
Laroque, G. and B. Salanié (2002) “Labor Market Institutions and Employment in France,” Journal of Applied Econometrics 17, 25–48.
Layard, R., S. Nickell and R. Jackman (1991) Unemployment-Macroeconomic Performance and the Labour Market, Oxford University Press, Oxford.
Marimon, R. and F. Zilibotti (2000) “Employment and Distributional Effects of Restricting Working Time,” European Economic Review 44(7), 1291.
Nickell, S. (2003) “Labour Market Institutions and Unemployment in OECD Countries,” CESIfo DICE Report 2, 2003.
Nickell, S. and R. Layard (1999) “Labour Market Institutions and Economic Performance” in O. Ashenfelter and D. Card, eds, Handbook of Labor Economics, 3, Elsevier Science and Technology, North-Holland, Amsterdam, 3029–84.
Pissarides, C. (1992) “Loss of Skill During Unemployment and the Persistence of Employment Shocks,” The Quarterly Journal of Economics 107(4), 1371–91.
Saint-Paul, G. (1993) “On the Political Economy of Labor Market Flexibility,” NBER Macroeconomics Annual.
Saint-Paul, G. (1996) “Exploring the Political Economy of Labour Market Institutions,” Economic Policy 23, 263–315.
Saint-Paul, G. (1998) “A Framework for Analyzing the Political Support for Active Labor Market Policy,” Journal of Public Economics 67, 151–65.
Saint-Paul, G. (2000) The Political Economy of Labour Market Institutions, Oxford University Press, Oxford.
Sinn, H.-W. et al. (2003) “Welfare to Work in Germany: A Proposal on How to Promote Employment and Growth,” CESifo Research Report no. 1.
Weitzman, M. (1984) The Share Economy: Conquering Stagflation, Harvard University Press, Cambridge, MA.
Author information
Authors and Affiliations
Editor information
Editors and Affiliations
Copyright information
© 2009 Palgrave Macmillan, a division of Macmillan Publishers Limited
About this chapter
Cite this chapter
Honkapohja, S., Westermann, F. (2009). Labour Market Reform in Europe. In: Honkapohja, S., Westermann, F. (eds) Designing the European Model. Palgrave Macmillan, London. https://doi.org/10.1057/9780230236653_3
Download citation
DOI: https://doi.org/10.1057/9780230236653_3
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-1-349-36131-1
Online ISBN: 978-0-230-23665-3
eBook Packages: Palgrave Economics & Finance CollectionEconomics and Finance (R0)