Squandering European Labor: Social Safety Nets in Times of Economic Turbulence
AbstractThis paper reviews the argument that high long-term unemployment in Europe is caused by generous social safety nets in times of economic turbulence. We report on the empirical evidence of a more turbulent economic environment and present the theoretical arguments that establish a link between turbulence and high unemployment. We conclude that a cure to the European unemployment problem must entail a reform of the unemployment insurance system so that benefits decline over the unemployment spell. If the social consensus in Europe makes it difficult to implement declining benefits, we suggest that a complementary way of providing incentives for the unemployed would be to reduce their leisure by imposing work requirements.
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Bibliographic InfoPaper provided by Stockholm School of Economics in its series Working Paper Series in Economics and Finance with number 321.
Length: 30 pages
Date of creation: 31 May 1999
Date of revision:
Publication status: Published in Scottish Journal of Political Economy, 1999, pages 367-388.
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European unemployment; economic turbulence; unemployment insurance;
Find related papers by JEL classification:
- E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
This paper has been announced in the following NEP Reports:
- NEP-ALL-1999-07-28 (All new papers)
- NEP-EEC-1999-07-28 (European Economics)
- NEP-LTV-1999-09-01 (Unemployment, Inequality & Poverty)
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- Lars Ljungqvist & Thomas J. Sargent, 2010. "How Sweden’s Unemployment Became More Like Europe’s," NBER Chapters, in: Reforming the Welfare State: Recovery and Beyond in Sweden, pages 189-223 National Bureau of Economic Research, Inc.
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