We analyze the channels by which an ill-functioning labor market changes the preferences of the people for public policy and therefore the decisions that are made. We not only discuss labour market reform but other important aspects of policy making such as the size and structure of government spending. The class of mechanisms that we highlight can be summarized as the very existence of unemployment generating political support for "sclerosis". This may help to explain the timid pace of reform, in particular the fact that any recovery sends them at the backfront of the political agenda, and the sometimes violent opposition generated by some measures, as we have seen mostly in France.
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Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number
343.
Find related papers by JEL classification: E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs J6 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies
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