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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. Francesco Daveri & Guido Tabellini, . "Unemployment, Growth and Taxation in Industrial Countries," Working Papers 122, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  2. 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.
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  5. 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.
  6. Belot, M.V.K. & Ours, J.C. van, 2001. "Unemployment and labor market institutions: An empirical analysis," Open Access publications from Tilburg University urn:nbn:nl:ui:12-89213, Tilburg University.
  7. Martin Neil Baily, 2001. "Macroeconomic Implications of the New Economy," Working Paper Series WP01-9, Peterson Institute for International Economics.
  8. Mattias Lundberg & Lyn Squire, 2003. "The simultaneous evolution of growth and inequality," Economic Journal, Royal Economic Society, vol. 113(487), pages 326-344, 04.
  9. Richard Nahuis & Henri de Groot, 2003. "Rising skill premia; you ain't seen nothing yet?," CPB Discussion Paper 20, CPB Netherlands Bureau for Economic Policy Analysis.
  10. Cecilia Garcia-Penalosa & Eve Caroli & Philippe Aghion, 1999. "Inequality and Economic Growth: The Perspective of the New Growth Theories," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1615-1660, December.
  11. Nickell, Stephen & Layard, Richard, 1999. "Labor market institutions and economic performance," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 46, pages 3029-3084 Elsevier.
  12. John P. Martin, 1998. "What Works Among Active Labour Market Policies: Evidence From OECD Countries' Experiences," OECD Labour Market and Social Policy Occasional Papers 35, OECD Publishing.
  13. 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.
  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.
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  16. Andersen, Torben M., 2004. "Challenges to the Scandinavian welfare model," European Journal of Political Economy, Elsevier, vol. 20(3), pages 743-754, September.
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Citations

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Cited by:
  1. Kaitila, Ville, 2006. "Productivity, Hours Worked, and Tax/Benefit Systems in Europe and Beyond," Discussion Papers 1015, The Research Institute of the Finnish Economy.
  2. 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.
  3. Thomas Seguin & Catherine Mathieu & Henri Sterdyniak, 2007. "Annex 6 : What future for Social Europe ?," Sciences Po publications info:hdl:2441/5082, Sciences Po.
  4. Stefan Groot & Henri de Groot & Martijn Smit, 2011. "Regional wage differences in the Netherlands: Micro-evidence on agglomeration externalities," CPB Discussion Paper 184, CPB Netherlands Bureau for Economic Policy Analysis.
  5. 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).
  6. Ruud de Mooij, 2004. "Towards efficient unemployment insurance in the Netherlands," CPB Memorandum 100, CPB Netherlands Bureau for Economic Policy Analysis.

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