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From Bismarck to Maastricht: The March to European Union and the Labor Compact

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  • Alan Krueger

Abstract

This paper considers the likely impact that European Union (EU) will have on the labor compact. It is argued that, despite increased economic integration in Europe, countries will still be able to maintain distinct labor practices if they are willing to bear the cost of those practices. The incidence of many social protections probably already falls on workers. In addition, it is argued that imperfect mobility of capital, labor, goods and services will limit the pressure that integration will place on the labor compact. Evidence is presented suggesting that labor mobility among EU countries has not increased after the elimination of remaining restrictions on intra-EU labor mobility in 1993. Moreover, immigration from non-EU countries, which is much larger than intra-EU migration, has declined since 1993. Evidence is also reviewed suggesting that the demand for social protection rises when countries are more open, and therefore subject to more severe external shocks. This finding suggests that increased economic integration and European Monetary Union could lead to greater demand for social protection. The U.S. experience with state workers' compensation insurance programs is offered as an example of enduring differences in labor market protections in highly integrated regional economies with a common currency.

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Bibliographic Info

Paper provided by Princeton University, Department of Economics, Industrial Relations Section. in its series Working Papers with number 803.

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Date of creation: Sep 1999
Date of revision:
Handle: RePEc:pri:indrel:803

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Related research

Keywords: labor compact; European Union; economic integration;

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References

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  1. Boeri, Tito & Nicoletti, Giuseppe & Scarpetta, Stefano, 2000. "Regulation And Labour Market Performance," CEPR Discussion Papers 2420, C.E.P.R. Discussion Papers.
  2. Eichengreen, Barry, 1993. "European Monetary Unification," Journal of Economic Literature, American Economic Association, vol. 31(3), pages 1321-57, September.
  3. David Bradford, 1991. "Tax Policy and the Economy, Volume 5," NBER Books, National Bureau of Economic Research, Inc, number brad91-1.
  4. Decressin, Jorg & Fatas, Antonio, 1995. "Regional labor market dynamics in Europe," European Economic Review, Elsevier, vol. 39(9), pages 1627-1655, December.
  5. Krueger, Alan B & Summers, Lawrence H, 1988. "Efficiency Wages and the Inter-industry Wage Structure," Econometrica, Econometric Society, vol. 56(2), pages 259-93, March.
  6. Agell, Jonas, 1998. "On the Benefits from Rigid Labour Markets: Norms, Market Failures, and Social Insurance," Working Paper Series 1998:17, Uppsala University, Department of Economics.
  7. Leslie E. Papke, 1991. "Interstate Business Tax Differentials and New Firm Location: Evidence from Panel Data," NBER Working Papers 3184, National Bureau of Economic Research, Inc.
  8. Fuchs, Victor R, 1976. "From Bismarck to Woodcock: The "Irrational" Pursuit of National Health Insurance," Journal of Law and Economics, University of Chicago Press, vol. 19(2), pages 347-59, August.
  9. Cukierman, A. & Tommasi, M., 1997. "When Does It Take a Nixon to Go to China," Papers 30-97, Tel Aviv.
  10. Alan Krueger & Jorn-Steffen Pischke, 1997. "Observations and Conjectures on the U.S. Employment Miracle," Working Papers 769, Princeton University, Department of Economics, Industrial Relations Section..
  11. Jonathan Gruber & Alan B. Krueger, 1990. "The Incidence of Mandated Employer-Provided Insurance: Lessons from Workers' Compensation Insurance," NBER Working Papers 3557, National Bureau of Economic Research, Inc.
  12. Feldstein, Martin & Horioka, Charles, 1980. "Domestic Saving and International Capital Flows," Economic Journal, Royal Economic Society, vol. 90(358), pages 314-29, June.
  13. Charles Brown & James L. Medoff, 1989. "The Employer Size-Wage Effect," NBER Working Papers 2870, National Bureau of Economic Research, Inc.
  14. Alan B. Krueger & John F. Burton, Jr., 1989. "The Employers' cost of Workers' Compensation Insurance: Magnitudes, Determinants, and Public Policy," NBER Working Papers 3029, National Bureau of Economic Research, Inc.
  15. Cowen, Tyler & Sutter, Daniel, 1998. " Why Only Nixon Could Go to China," Public Choice, Springer, vol. 97(4), pages 605-15, December.
  16. Calmfors, Lars, 1998. "Macroeconomic Policy, Wage Setting and Employment - What Difference Does the EMU Make?," Seminar Papers 657, Stockholm University, Institute for International Economic Studies.
  17. Sinn, Hans-Werner, 1998. "European Integration and the Future of the Welfare State," CEPR Discussion Papers 1871, C.E.P.R. Discussion Papers.
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