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Demand- and Supply-Side Policies and Unemployment: Policy Implications of the Insider-Outsider Approach


  • Lindbeck, Assar
  • Snower, Dennis J


This paper explores a variety of government policies that can stimulate employment when unemployment is generated through conflicts of interest between insiders and outsiders. It also provides guidelines for identifying polices that may be ineffective. The authors show how supply-side policies can stimulate employment by raising worker productivity or reducing labor costs. Their analysis indicates that when wages and prices are flexible, product demand policies have no significant effect on employment unless these policies simulate labor productivity, the entry of firms, capital utilization, or investment. Copyright 1990 by The editors of the Scandinavian Journal of Economics.

Suggested Citation

  • Lindbeck, Assar & Snower, Dennis J, 1990. " Demand- and Supply-Side Policies and Unemployment: Policy Implications of the Insider-Outsider Approach," Scandinavian Journal of Economics, Wiley Blackwell, vol. 92(2), pages 279-305.
  • Handle: RePEc:bla:scandj:v:92:y:1990:i:2:p:279-305

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    References listed on IDEAS

    1. Bresnahan, Timothy F. & Trajtenberg, M., 1995. "General purpose technologies 'Engines of growth'?," Journal of Econometrics, Elsevier, vol. 65(1), pages 83-108, January.
    2. anonymous, 1995. "Does the bouncing ball lead to economic growth?," Regional Update, Federal Reserve Bank of Atlanta, issue Jul, pages 1-2,4-6.
    3. Robert J. Barro, 2013. "Inflation and Economic Growth," Annals of Economics and Finance, Society for AEF, vol. 14(1), pages 121-144, May.
    4. Daron Acemoglu, 1999. "Changes in Unemployment and Wage Inequality: An Alternative Theory and Some Evidence," American Economic Review, American Economic Association, vol. 89(5), pages 1259-1278, December.
    5. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 70(1), pages 65-94.
    6. N. Gregory Mankiw & David Romer & David N. Weil, 1992. "A Contribution to the Empirics of Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 107(2), pages 407-437.
    7. Xavier Sala-I-Martin, 1997. "Transfers, Social Safety Nets, and Economic Growth," IMF Staff Papers, Palgrave Macmillan, vol. 44(1), pages 81-102, March.
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    Cited by:

    1. Rebecca M. Blank & Richard B. Freeman, 1994. "Evaluating the Connection between Social Protection and Economic Flexibility," NBER Chapters,in: Social Protection versus Economic Flexibility: Is There a Trade-Off?, pages 21-42 National Bureau of Economic Research, Inc.
    2. Fung, K.C. & C. Lin, Chelsea, 2005. "European Economic Integration and the Effectiveness of Employment Policies," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 20, pages 419-438.
    3. Rebecca M. Blank, 1997. "No Easy Answers: Comparative Labor Market Problems in the United States versus Europe," Economics Working Paper Archive wp_188, Levy Economics Institute.
    4. Muysken Joan & Zwick Thomas, 1996. "A note on incentive wages with human capital formation," Research Memorandum 012, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
    5. Aguiar, Alvaro & Ribeiro, Ana Paula, 2009. "Monetary policy and the transition costs of a labor market reform," Journal of Macroeconomics, Elsevier, vol. 31(4), pages 547-560, December.
    6. Tony Syme, 2000. "Public Policy and Unemployment in Interwar France: An Empirical Approach," Economics Series Working Papers 55, University of Oxford, Department of Economics.

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