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Evaluating the Connection between Social Protection and Economic Flexibility

In: Social Protection versus Economic Flexibility: Is There a Trade-Off?

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  • Rebecca M. Blank
  • Richard B. Freeman

Abstract

Over the last 10 years, a variety of analysts have blamed high unemployment and stagnant economic growth in Europe on inflexible labor markets and pointed to the US as a more flexible economy, due to its less regulated labor markets and less generous social protection programs. This paper reviews that debate, critiques the arguments about the relationship between social protection programs and labor market adjustment, and reviews the research literature on this topic. In general, we conclude that much less is known about the aggregate effects of social protection programs on the economy than is generally claimed. Within the very limited existing research, there is little evidence of a significant trade-off between social programs and labor market adjustment, although there is also not much evidence to support those who claim that social protection promotes economic growth. The paper ends by suggesting future research directions.

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This chapter was published in:

  • Rebecca M. Blank, 1994. "Social Protection versus Economic Flexibility: Is There a Trade-Off?," NBER Books, National Bureau of Economic Research, Inc, number blan94-1, January.
    This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 11253.

    Handle: RePEc:nbr:nberch:11253

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    1. Katz, Lawrence F. & Meyer, Bruce D., 1990. "The impact of the potential duration of unemployment benefits on the duration of unemployment," Journal of Public Economics, Elsevier, vol. 41(1), pages 45-72, February.
    2. Hansen, Gary D & Imrohoroglu, Ayse, 1992. "The Role of Unemployment Insurance in an Economy with Liquidity Constraints and Moral Hazard," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 100(1), pages 118-42, February.
    3. Gottschalk, Peter, 1996. "Is the correlation in welfare participation across generations spurious?," Journal of Public Economics, Elsevier, vol. 63(1), pages 1-25, December.
    4. Lindbeck, A. & Snower, D.J., 1989. "Demand- And Supply-Side Policies And Unemployment: Policy Implications Of The Insider-Outside Approach," Papers, Stockholm - International Economic Studies 439, Stockholm - International Economic Studies.
    5. Robert H. Haveman & Barbara L. Wolfe, 1984. "Schooling and Economic Well-Being: The Role of Nonmarket Effects," Journal of Human Resources, University of Wisconsin Press, vol. 19(3), pages 377-407.
    6. Atkinson, Anthony B & Micklewright, John, 1991. "Unemployment Compensation and Labor Market Transitions: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 29(4), pages 1679-1727, December.
    7. Lazear, Edward P, 1990. "Job Security Provisions and Employment," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 105(3), pages 699-726, August.
    8. Steven J. Davis, 1992. "Cross-Country Patterns of Change in Relative Wages," NBER Chapters, in: NBER Macroeconomics Annual 1992, Volume 7, pages 239-300 National Bureau of Economic Research, Inc.
    9. Susan N. Houseman, 1991. "Industrial Restructuring with Job Security: The Case of European Steel," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, W.E. Upjohn Institute for Employment Research, number snh1991.
    10. W. Steven Barnett, 1992. "Benefits of Compensatory Preschool Education," Journal of Human Resources, University of Wisconsin Press, vol. 27(2), pages 279-312.
    11. Lawrence F. Katz & Gary W. Loveman & David G. Blanchflower, 1993. "A Comparison of Changes in the Structure of Wages," NBER Working Papers 4297, National Bureau of Economic Research, Inc.
    12. Freeman, Richard B, 1988. "Evaluating the European View that the United States Has No Unemployment Problem," American Economic Review, American Economic Association, vol. 78(2), pages 294-99, May.
    13. Moffitt, Robert, 1992. "Incentive Effects of the U.S. Welfare System: A Review," Journal of Economic Literature, American Economic Association, vol. 30(1), pages 1-61, March.
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    Cited by:
    1. Sanders Korenman & David Neumark, 2000. "Cohort Crowding and Youth Labor Markets (A Cross-National Analysis)," NBER Chapters, in: Youth Employment and Joblessness in Advanced Countries, pages 57-106 National Bureau of Economic Research, Inc.
    2. Aino Salom�ki & Teresa Munzi, 1999. "Net Replacement Rates of the Unemployed. Comparison of various approaches," European Economy - Economic Papers, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission 133, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
    3. Cockx, Bart, 1999. "The Design of Active Labour Market Policies. What Matters and What Doesn't ?," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1999035, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    4. Agell, Jonas, 2000. "On the Determinants of Labour Market Institutions: Rent-sharing vs. Social Insurance," Working Paper Series, Uppsala University, Department of Economics 2000:16, Uppsala University, Department of Economics.
    5. Alfonso Arpaia & Gilles Mourre, 2009. "Institutions and Performance in European Labour Markets: Taking a Fresh Look at Evidence," Working Papers CEB, ULB -- Universite Libre de Bruxelles 09-049.RS, ULB -- Universite Libre de Bruxelles.
    6. Jonas Agell, 2002. "On the Determinants of Labour Market Institutions: Rent Seeking vs. Social Insurance," German Economic Review, Verein für Socialpolitik, Verein für Socialpolitik, vol. 3(2), pages 107-135, 05.
    7. Noel Gaston & Gulasekaran Rajaguru, 2004. "The Rise (and Fall) of Labour Market Programmes: The Role of Global and Domestic Factors," ISER Discussion Paper 0615, Institute of Social and Economic Research, Osaka University.
    8. Siv Gustafsson & Eiko Kenjoh & Cecile Wetzels, 2001. "Employment Choices and Pay Differences between Non-Standard and Standard Work in Britain, Germany, Netherlands and Sweden," Tinbergen Institute Discussion Papers 01-086/3, Tinbergen Institute.
    9. Vodopivec, Milan & Raju, Dhushyanth, 2002. "Income support systems for the unemployed : issues and options," Social Protection Discussion Papers 25529, The World Bank.
    10. Axel Dreher & Noel Gaston, 2008. "Has Globalization Increased Inequality?," Review of International Economics, Wiley Blackwell, vol. 16(3), pages 516-536, 08.
    11. George C. Bitros & Kyprianos Prodromidis, 2004. "Welfare benefits and the rate of unemployment: some evidence from the European Union in the last thirty years," Macroeconomics, EconWPA 0410004, EconWPA.
    12. Jonas Agell, 2001. "Warum haben wir rigide Arbeitsmärkte? Rent-seeking versus Soziale Sicherung," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 2(4), pages 363-381, November.
    13. Mares, Isabela, 1996. "Firms and the welfare state: the emergence of new forms of unemployment," Discussion Papers, Research Unit: Economic Change and Employment FS I 96-308, Social Science Research Center Berlin (WZB).

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