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Flexibility and Growth

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  • Annamaria Simonazzi
  • Paola Villa

Abstract

After two decades of theoretical discussion and application of labour policies aimed at flexibility, ever-spreading unemployment in Europe has compelled some official institutions to admit that the 'rigidity' of the labour market does not suffice to account for the different trends in employment displayed by Europe and the United States. In this paper, we focus on the role played by differentials in income growth. After briefly reviewing the explanations of European unemployment based on labour market rigidity and their respective weaknesses, we look at the relationship between growth and employment, concluding that there are grounds for maintaining that the causes of Europe's higher unemployment reside mainly in its lower rate of growth.We therefore investigate the reasons that may be responsible for a more stringent macroeconomic constraint on European growth.We conclude that if a lack of growth is at the root of European unemployment, then merely dismantling labour market institutions, and replacing them with a more flexible system of industrial relations, will not only fail to produce the expected results but may also have negative effects, in both the social and productive structure.

Suggested Citation

  • Annamaria Simonazzi & Paola Villa, 1999. "Flexibility and Growth," International Review of Applied Economics, Taylor & Francis Journals, vol. 13(3), pages 281-311.
    • Handle: RePEc:taf:irapec:v:13:y:1999:i:3:p:281-311
    DOI: 10.1080/026921799101562
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    2. Gabriella BERLOFFA & Eleonora MATTEAZZI & Alina ŞANDOR & Paola VILLA, 2016. "Youth employment security and labour market institutions: A dynamic perspective," International Labour Review, International Labour Organization, vol. 155(4), pages 651-678, December.
    3. Jacqueline O’Reilly & Werner Eichhorst & András Gábos & Kari Hadjivassiliou & David Lain & Janine Leschke & Seamus McGuinness & Lucia Mýtna Kureková & Tiziana Nazio & Renate Ortlieb & Helen Russ, 2015. "Five Characteristics of Youth Unemployment in Europe," SAGE Open, , vol. 5(1), pages 21582440155, March.
    4. Claudio De Vincenti, 2007. "‘Baumol'S Disease’, Production Externalities And Productivity Effects Of Intersectoral Transfers," Metroeconomica, Wiley Blackwell, vol. 58(3), pages 396-412, July.
    5. Raul Eamets, 2004. "Labour market flows and adjustment to macroeconomic shocks in the Baltic States," Post-Communist Economies, Taylor & Francis Journals, vol. 16(1), pages 47-71.

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