Unemployment, Labor Market Reform, and Monetary Union
Monetary union, such as the Economic and Monetary Union in Europe (EMU), may affect incentives for labor market reform, and thus equilibrium unemployment, through several mechanisms. If an inflation bias exists, there is usually a stronger incentive to reduce equilibrium unemployment through national reform outside rather than inside the EMU. Absent such a bias, EMU membership could lead to more reform. One reason is that reform may increase wage flexibility, which can substitute for monetary policy in the EMU. Another reason could be a precautionary motive for low equilibrium unemployment to reduce the utility cost of increased macroeconomic variability in the EMU. Copyright 2001 by University of Chicago Press.
References listed on IDEAS
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- Franco Modigliani & Jean Paul Fitoussi & Beniamino Moro & Denis Snower & Robert Solo & Alfred Steinherr & Paolo Sylos Labini, 1999.
"An Economist’s Manifesto on Unemployment in the European Union,"
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- F. Modigliani & J.-P. Fitoussi & B. Moro & D. Snower & R. Solow & A. Steinherr & P. Sylos Labini, 1998. "An economists' Manifesto on unemployment in the European Union," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 51(206), pages 327-361.
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