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Is the American Model Miss World? Choosing between the Anglo-Saxon Model and a European-Style Alternative

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  • H.L.F. de Groot
  • R. Nahuis
  • P.J.G. Tang

Abstract

Abstract In Lisbon, the European Union has set itself the goal to become the most competitive economy in the world in 2010 without harming social cohesion and the environment. The motivation for introducing this target is the substantially higher GDP per capita of US citizens. The difference in income is mainly a difference in the number of hours worked per employee. In terms of productivity per hour and employment per inhabitant, several European countries score equally well or even better than the United States, while at the same time they outperform the United States with a more equal distribution of income. The European social models are at least as interesting as the US model that is often considered a role model. In an empirical analysis for OECD countries, we aim to unravel ‘the secret of success’. Our regression results show that income redistribution (through a social security system) does not necessarily lead to lower participation and higher unemployment, provided that countries supplement it with active labour market policies. Especially, spending on employment services like job-search assistance and vocational guidance, seems effective. Furthermore, the results suggest that generous unemployment benefits of short duration contribute to employment without widening the income distribution.

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Bibliographic Info

Paper provided by Utrecht School of Economics in its series Working Papers with number 04-26.

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Date of creation: 2004
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Handle: RePEc:use:tkiwps:0426

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Keywords: welfare states; income inequality; unemployment; productivity; participation; labour market policies;

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References

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  1. Nickell, S. & Layard, R., 1997. "Labour Market Institutions and Economic Performance," Papers 23, Centre for Economic Performance & Institute of Economics.
  2. Belot, Michele & van Ours, Jan C., 2001. "Unemployment and Labor Market Institutions: An Empirical Analysis," Journal of the Japanese and International Economies, Elsevier, vol. 15(4), pages 403-418, December.
  3. Blanchard, Olivier & Wolfers, Justin, 2000. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," Economic Journal, Royal Economic Society, vol. 110(462), pages C1-33, March.
  4. John P Martin, 1998. "What Works Among Active Labour Market Policies: Evidence from OECD Countries' Experiences," RBA Annual Conference Volume, in: Guy Debelle & Jeff Borland (ed.), Unemployment and the Australian Labour Market Reserve Bank of Australia.
  5. Garcia-Penalosa, Cecilia & Aghion, Philippe & Caroli, Eve, 1999. "Inequality and Economic Growth: The Perspective of the New Growth Theories," Economics Papers from University Paris Dauphine 123456789/10091, Paris Dauphine University.
  6. Linda A. Bell & Richard B. Freeman, 2000. "The Incentive for Working Hard: Explaining Hours Worked Differences in the U.S. and Germany," NBER Working Papers 8051, National Bureau of Economic Research, Inc.
  7. Martin Neil Baily, 2001. "Macroeconomic implications of the new economy," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 201-268.
  8. R. Nahuis & H.L.F. de Groot, 2003. "Rising skills premia: you ain't seen nothing yet," Working Papers 03-02, Utrecht School of Economics.
  9. Martin Neil Baily, 2001. "Macroeconomic Implications of the New Economy," Working Paper Series WP01-9, Peterson Institute for International Economics.
  10. Ruud de Mooij & Paul Tang, 2003. "Four futures of Europe," CPB Special Publication 49, CPB Netherlands Bureau for Economic Policy Analysis.
  11. Paul Cavelaars, 2003. "Has the tradeoff between productivity gains and job growth disappeared?," MEB Series (discontinued) 2003-12, Netherlands Central Bank, Monetary and Economic Policy Department.
  12. Andersen, Torben M., 2004. "Challenges to the Scandinavian welfare model," European Journal of Political Economy, Elsevier, vol. 20(3), pages 743-754, September.
  13. Mattias Lundberg & Lyn Squire, 2003. "The simultaneous evolution of growth and inequality," Economic Journal, Royal Economic Society, vol. 113(487), pages 326-344, 04.
  14. Groot, H.L.F. de & Schaik, A.B.T.M. van, 1997. "Unemployment and catching up: Europe vis à vis the USA," Open Access publications from Tilburg University urn:nbn:nl:ui:12-73836, Tilburg University.
  15. Daveri, Francesco & Tabellini, Guido, 1997. "Unemployment, Growth and Taxation in Industrial Countries," CEPR Discussion Papers 1681, C.E.P.R. Discussion Papers.
  16. Stephen Nickell, 1997. "Unemployment and Labor Market Rigidities: Europe versus North America," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 55-74, Summer.
  17. Belot, M.V.K., 2003. "Labor Market Institutions in OECD Countries: Origins and Consequences," Open Access publications from Tilburg University urn:nbn:nl:ui:12-91545, Tilburg University.
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Citations

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Cited by:
  1. Wim Suyker & Henri de Groot & P. Buitelaar, 2007. "India and the Dutch economy; stylised facts and prospects," CPB Document 155, CPB Netherlands Bureau for Economic Policy Analysis.
  2. Stefan P.T. Groot & Henri L.F. de Groot & Martijn Smit, 2011. "Regional Wage Differences in the Netherlands: Micro-Evidence on Agglomeration Externalities," Tinbergen Institute Discussion Papers 11-050/3, Tinbergen Institute.
  3. repec:spo:wpecon:info:hdl:2441/5082 is not listed on IDEAS
  4. Catherine Mathieu & Henri Sterdyniak, 2008. "European social model(s) and social Europe," Documents de Travail de l'OFCE 2008-10, Observatoire Francais des Conjonctures Economiques (OFCE).
  5. Ruud de Mooij, 2004. "Towards efficient unemployment insurance in the Netherlands," CPB Memorandum 100, CPB Netherlands Bureau for Economic Policy Analysis.
  6. Thomas Seguin & Catherine Mathieu & Henri Sterdyniak, 2007. "Annex 6 : What future for Social Europe ?," Sciences Po publications info:hdl:2441/5082, Sciences Po.
  7. repec:spo:wpecon:info:hdl:2441/6157 is not listed on IDEAS
  8. Kaitila, Ville, 2006. "Productivity, Hours Worked, and Tax/Benefit Systems in Europe and Beyond," Discussion Papers 1015, The Research Institute of the Finnish Economy.

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