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Incentives and Complementarities of Flexicurity

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  • Alessio J. G. Brown
  • Dennis Snower

Abstract

This paper analyses how and to which degree the Danish flexicurity concept and its various elements achieve the renowned Danish miracle by evaluating their unemployment and inequality effects and their complementarities. We develop a microfounded model of searching workers and firms, calibrate it to Germany and perform the policy experiment of implementing the full Danish flexicurity set of policies (low employment protection, high unemployment benefits and workfare). Our results show that implementing the Danish flexicurity concept in Germany would reduce unemployment and earnings inequality substantially. Furthermore our analysis illustrates that the Danish flexicurity policies have some apparent complementarities in Germany - the reduction of unemployment effect is nearly 40% greater when the policies are implemented in conjunction than in isolation

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Bibliographic Info

Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1526.

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Length: 25 pages
Date of creation: Jun 2009
Date of revision:
Handle: RePEc:kie:kieliw:1526

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Keywords: flexicurity; workfare; firing costs; employment; unemployment;

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References

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Citations

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Cited by:
  1. Brown, Alessio J. G. & Koettl, Johannes, 2012. "Active Labor Market Programs: Employment Gain or Fiscal Drain?," IZA Discussion Papers 6880, Institute for the Study of Labor (IZA).
  2. Christian Keuschnigg & Thomas Davoine, 2010. "Flexicurity and Job Reallocation," University of St. Gallen Department of Economics working paper series 2010 2010-11, Department of Economics, University of St. Gallen.
  3. Brown, Alessio J. G. & Merkl, Christian & Lechthaler, Wolfgang, 2009. "Firing costs and the business cycle: Policy implications in light of the financial crisis," Open Access Publications from Kiel Institute for the World Economy 32947, Kiel Institute for the World Economy (IfW).
  4. Andersen, Torben M, 2010. "Incentive and Insurance Effects of Tax Financed Unemployment Insurance," CEPR Discussion Papers 8025, C.E.P.R. Discussion Papers.
  5. Torben Andersen, 2012. "A Flexicurity Labour Market in the Great Recession: The Case of Denmark," De Economist, Springer, vol. 160(2), pages 117-140, June.

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