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European Economic Integration and the Effectiveness of Employment Policies

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Author Info

  • Fung, K.C.

    ()
    (University of California, Santa Cruz)

  • C. Lin, Chelsea

    (National Dong Hwa University)

Abstract

This paper examines the qualitative impact and the degree of effectiveness of several labor market policies when domestic union’s wage response and economic integration are explicitly taken into account. The employment policies considered include payroll tax cuts, unemployment benefits cuts, aggregate demand expansion and wage subsidies. It is shown that with endogenous wages and an open economy, these policies can in some cases become more potent. But in other instances, they become less effective. In fact, under some conditions derived in this paper, employment policies can even be counterproductive, leading to a drop in domestic employment.

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Bibliographic Info

Article provided by Center for Economic Integration, Sejong University in its journal Journal of Economic Integration.

Volume (Year): 20 (2005)
Issue (Month): ()
Pages: 419-438

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Handle: RePEc:ris:integr:0323

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Web page: http://econo.sejong.ac.kr/
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Related research

Keywords: European unemployment; Economic integration; Labor market structure;

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  1. Lindbeck, Assar & Snower, Dennis J., 1989. "Demand- and Supply-Side Policies and Unemployment: Policy Implications of the Insider-Outsider Approach," CEPR Discussion Papers 329, C.E.P.R. Discussion Papers.
  2. Horst Siebert, 1997. "Labor Market Rigidities: At the Root of Unemployment in Europe," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 37-54, Summer.
  3. Stephen Machin & Alan Manning, 1998. "The Causes and Consequences of Long-Term Unemployment in Europe," CEP Discussion Papers dp0400, Centre for Economic Performance, LSE.
  4. Fung, K. C. & Huizinga, Harry, 1999. "Economic Integration and Firm-Union Interaction: The Role of Market Structure," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 14, pages 554-571.
  5. Oswald, A. J., 1995. "Efficient contracts are on the labour demand curve: Theory and facts," Labour Economics, Elsevier, vol. 2(1), pages 102-102, March.
  6. Minford, Patrick, 1983. "Labour Market Equilibrium in an Open Economy," Oxford Economic Papers, Oxford University Press, vol. 35(0), pages 207-44, Supplemen.
  7. Oswald, Andrew J, 1982. "The Microeconomic Theory of the Trade Union," Economic Journal, Royal Economic Society, vol. 92(367), pages 576-95, September.
  8. Stephen Nickell, 1997. "Unemployment and Labor Market Rigidities: Europe versus North America," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 55-74, Summer.
  9. Robert M. Coen & Bert G. Hickman, 1987. "Keynesian and Classical Unemployment in Four Countries," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 18(1), pages 123-206.
  10. Stanley Fischer, 1986. "NBER Macroeconomics Annual 1986, Volume 1," NBER Books, National Bureau of Economic Research, Inc, number fisc86-1.
  11. Fung, K. C., 1989. "Profit-sharing and European unemployment," European Economic Review, Elsevier, vol. 33(9), pages 1787-1798, December.
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