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European Economic Integration and the Effectiveness of Employment Policies

Author

Listed:
  • K.C. Fung

    (University of California, Santa Cruz)

  • Chelsea C. Lin

    (National Dong Hwa University)

Abstract

This paper examines the qualitative impact and the degree of effectiveness of several labor market policies when domestic union’s wage response and economic integration are explicitly taken into account. The employment policies considered include payroll tax cuts, unemployment benefits cuts, aggregate demand expansion and wage subsidies. It is shown that with endogenous wages and an open economy, these policies can in some cases become more potent. But in other instances, they become less effective. In fact, under some conditions derived in this paper, employment policies can even be counterproductive, leading to a drop in domestic employment.

Suggested Citation

  • K.C. Fung & Chelsea C. Lin, 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.
    • Handle: RePEc:ris:integr:0323
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    Keywords

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    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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