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European Economic Integration and the Effectiveness of Employment Policies

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  • Fung, K. C.
  • Lin, Chelsea C.
  • Maechler, Andrea M.

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

Paper provided by Center for International Economics, UC Santa Cruz in its series Santa Cruz Center for International Economics, Working Paper Series with number qt0tp8k3c5.

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Date of creation: 20 Mar 2003
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Handle: RePEc:cdl:scciec:qt0tp8k3c5

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Web page: http://www.escholarship.org/repec/sccie/
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Keywords: European unemployment; economic integration; labor market;

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  1. Minford, Patrick, 1983. "Labour Market Equilibrium in an Open Economy," Oxford Economic Papers, Oxford University Press, vol. 35(0), pages 207-44, Supplemen.
  2. Machin, Stephen & Manning, Alan, 1999. "The causes and consequences of longterm unemployment in Europe," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 47, pages 3085-3139 Elsevier.
  3. Oswald, Andrew J., 1993. "Efficient contracts are on the labour demand curve : Theory and facts," Labour Economics, Elsevier, vol. 1(1), pages 85-113, June.
  4. Fung, K. C., 1989. "Profit-sharing and European unemployment," European Economic Review, Elsevier, vol. 33(9), pages 1787-1798, December.
  5. Lindbeck, A. & Snower, D.J., 1989. "Demand- And Supply-Side Policies And Unemployment: Policy Implications Of The Insider-Outside Approach," Papers 439, Stockholm - International Economic Studies.
  6. Stanley Fischer, 1986. "NBER Macroeconomics Annual 1986, Volume 1," NBER Books, National Bureau of Economic Research, Inc, number fisc86-1.
  7. 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.
  8. 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.
  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. Oswald, Andrew J, 1982. "The Microeconomic Theory of the Trade Union," Economic Journal, Royal Economic Society, vol. 92(367), pages 576-95, September.
  11. 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.
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