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Are institutional rigidities at the root of European unemployment?


  • Ronald Schettkat


The Netherlands experienced employment growth higher than that in the US and achieved an unemployment rate of less than 3%, but Germany's unemployment rate remained at high levels. A widely held view regards a distorted incentive structure in welfare states as the 'root of the European unemployment problem', but welfare state institutions in the Netherlands are more generous than the German ones. Therefore, differences in the incentive structures between the two economies cannot explain the differences in employment success. The reasons for this seem instead to be rooted in coordinated monetary, wage and fiscal policies in the Netherlands while these are incompatible policies in Germany. Copyright 2003, Oxford University Press.

Suggested Citation

  • Ronald Schettkat, 2003. "Are institutional rigidities at the root of European unemployment?," Cambridge Journal of Economics, Oxford University Press, vol. 27(6), pages 771-787, November.
  • Handle: RePEc:oup:cambje:v:27:y:2003:i:6:p:771-787

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    References listed on IDEAS

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    Cited by:

    1. Olivier Blanchard & Thomas Philippon, 2004. "The Quality of Labor Relations and Unemployment," NBER Working Papers 10590, National Bureau of Economic Research, Inc.
    2. Felix Reichling, 2005. "Retraining the Unemployed in a Matching Model with Turbulence," Discussion Papers 04-016, Stanford Institute for Economic Policy Research.
    3. Andrés Rodríguez-Pose & Vassilis Tselios, 2012. "Welfare Regimes and the Incentives to Work and Get Educated," Environment and Planning A, , vol. 44(1), pages 125-149, January.
    4. Hein, Eckhard & Truger, Achim, 2004. "What ever happened to Germany? Is the decline of the former European key currency country caused by structural sclerosis or macroeconomic mismanagement?," Darmstadt Discussion Papers in Economics 134, Darmstadt University of Technology, Department of Law and Economics.
    5. Hedvig Horváth & Zoltán Szalai, 2008. "Labour market institutions in Hungary with a focus on wage and employment flexibility," MNB Occasional Papers 2008/77, Magyar Nemzeti Bank (Central Bank of Hungary).
    6. Eckhard Hein & Achim Truger, 2005. "What ever happened to Germany? Is the decline of the former european key currency country caused by structural sclerosis or by macroeconomic mismanagement?," International Review of Applied Economics, Taylor & Francis Journals, vol. 19(1), pages 3-28.
    7. Sujit Kapadia, 2003. "The Capital Stock and Equilibrium Unemployment: A New Theoretical Perspective," Economics Series Working Papers 181, University of Oxford, Department of Economics.
    8. Eckhard Hein & Achim Truger, 2005. "Macroeconomic policies, wage developments, and Germany’s stagnation," Macroeconomics 0508015, EconWPA.
    9. Sujit Kapadia, 2005. "Optimal Monetary Policy under Hysteresis," Economics Series Working Papers 250, University of Oxford, Department of Economics.

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