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The Interaction of Labor Market Regulation and Labor Market Policies in Welfare State Reform

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  • Eichhorst, Werner

    ()
    (IZA)

  • Konle-Seidl, Regina

    ()
    (Institute for Employment Research (IAB), Nuremberg)

Abstract

Employment protection legislation, unemployment benefits and active labor market policy are Janus-faced institutions. On the one hand they are devices of insurance against labor market risk that provide income and employment security. On the other hand they influence the capacities of labor markets to adapt to changing economic conditions since institutional features of the welfare state also affect actors' economic adaptation strategies. Insufficient labor market adaptability results in higher and more persistent unemployment. Hence, in order to in-crease the adaptability of European labor markets, reforms had to address these closely inter-acting policy areas. The first aim of the paper is to describe recent reforms of employment protection, unemployment insurance and active labor market policies in different European welfare states (Denmark, Sweden, the United Kingdom, Switzerland, the Netherlands, Spain and Germany). The paper shows whether and to what extent national policy patterns converge in the direction of a new balance of flexibility and security with employment protection being eased and labor market policies being "activated" through a combination of "carrots and sticks". Secondly, in terms of the political economy of welfare state reforms, the paper will answer the question whether consistent reforms of the three institutions are more likely in political systems characterized by relative strong government and/or social partnership since such institutional prerequisites may favor "package deals" across policy areas.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1718.

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Length: 40 pages
Date of creation: Aug 2005
Date of revision:
Publication status: published in: Comparative Labor Law and Policy Journal, 2006, 28 (1), 1- 41; also available in Chinese
Handle: RePEc:iza:izadps:dp1718

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Keywords: labor market reform; unemployment insurance; labor market policy; employment protection;

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References

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  1. Gilles Saint-Paul, 2002. "The Political Economy of Employment Protection," Journal of Political Economy, University of Chicago Press, vol. 110(3), pages 672-701, June.
  2. Olivier Blanchard & Justin Wolfers, 1999. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," NBER Working Papers 7282, National Bureau of Economic Research, Inc.
  3. Calmfors, Lars & Forslund, Anders & Hemström, Maria, 2002. "Does Active Labour Market Policy Work? Lessons from the Swedish Experiences," Seminar Papers 700, Stockholm University, Institute for International Economic Studies.
  4. Ours, J.C. van & Nickell, S.J., 2000. "The Netherlands and the United Kingdom: A European unemployment miracle?," Open Access publications from Tilburg University urn:nbn:nl:ui:12-84119, Tilburg University.
  5. Saint-Paul, Gilles, 2004. "Why are European Countries Diverging in their Unemployment Experience?," IDEI Working Papers 269, Institut d'Économie Industrielle (IDEI), Toulouse.
  6. Adriana Kugler & Juan F. Jimeno & Virginia Hernanz, . "Employment Consequences of Restrictive Permanent Contracts: Evidence from Spanish Labor Market Reforms," Working Papers 2003-14, FEDEA.
  7. Dennis J. Snower & David T. Coe, 1996. "Policy Complementarities: The Case for Fundamental Labor Market Reform," IMF Working Papers 96/93, International Monetary Fund.
  8. Orszag, Mike & Snower, Dennis J., 1999. "Anatomy of Policy Complementarities," IZA Discussion Papers 41, Institute for the Study of Labor (IZA).
  9. Anke Hassel, 2003. "The Politics of Social Pacts," British Journal of Industrial Relations, London School of Economics, vol. 41(4), pages 707-726, December.
  10. Gangl, Markus, 2002. "Unemployment benefits as a search subsidy: new evidence on duration and wage effects of unemployment insurance," Discussion Papers, Research Unit: Labor Market Policy and Employment FS I 02-208, Social Science Research Center Berlin (WZB).
  11. Olympia Bover & Pilar García-Perea & Pedro Portugal, 2000. "Labour market outliers: Lessons from Portugal and Spain," Economic Policy, CEPR & CES & MSH, vol. 15(31), pages 379-428, October.
  12. Gerfin, Michael & Lechner, Michael, 2001. "A Microeconometric Evaluation of Active Labour Market Policy in Switzerland," CEPR Discussion Papers 2993, C.E.P.R. Discussion Papers.
  13. Dolado, Juan J. & Garcia-Serrano, Carlos & Jimeno, Juan Francisco, 2001. "Drawing Lessons From the Boom of Temporary Jobs in Spain," CEPR Discussion Papers 2884, C.E.P.R. Discussion Papers.
  14. Tito Boeri & J.Ignacio Conde-Ruiz & Vincenzo Galasso, 2003. "Protecting Against Labour Market Risk: Employment Protection or Unemployment Benefits?," Working Papers 239, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  15. James J. Heckman, 2002. "Flexibility and Job Creation: Lessons for Germany," NBER Working Papers 9194, National Bureau of Economic Research, Inc.
  16. Madsen, P.K., 2006. "Labour Market Flexibility and Social Protection in European Welfare States - Contrasts and Similarities," Australian Bulletin of Labour, National Institute of Labour Studies, vol. 32(2), pages 139-162.
  17. Ebbinghaus, Bernhard & Hassel, Anke, 1999. "Striking deals: Concertation in the reform of continental European welfare states," MPIfG Discussion Paper 99/3, Max Planck Institute for the Study of Societies.
  18. Martin, John P. & Grubb, David, 2001. "What works and for whom: a review of OECD countries' experiences with active labour market policies," Working Paper Series 2001:14, IFAU - Institute for Evaluation of Labour Market and Education Policy.
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