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On the Benefits from Rigid Labour Markets: Norms, Market Failures, and Social Insurance

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Author Info

  • Agell, J.

Abstract

The common view that far-reaching labour market deregulation is the only remedy for high European unemployment is too simplistic. First, the ecidence suggests that deeply rooted social customs are an important cause of wage rigidity, going beyonf the legal constraints emphasized in the political debate. Second, in a second-best setting, a compressed wage structure may generate an efficiency gain. Finally, based on simple plots of the relation between labour market institutions and openness in OECD countries, I conclude that the globalization of economic activity may lead to increased demand for various labour market rigidities.

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Bibliographic Info

Paper provided by Uppsala - Working Paper Series in its series Papers with number 1998:17.

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Length: 36 pages
Date of creation: 1998
Date of revision:
Handle: RePEc:fth:uppaal:1998:17

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Keywords: LABOUR MARKET ; WAGES ; UNEMPLOYMENT ; MIGRATION;

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