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Evaluating the Connection between Social Protection and Economic Flexibility

In: Social Protection versus Economic Flexibility: Is There a Trade-Off?

  • Rebecca M. Blank
  • Richard B. Freeman

Over the last 10 years, a variety of analysts have blamed high unemployment and stagnant economic growth in Europe on inflexible labor markets and pointed to the US as a more flexible economy, due to its less regulated labor markets and less generous social protection programs. This paper reviews that debate, critiques the arguments about the relationship between social protection programs and labor market adjustment, and reviews the research literature on this topic. In general, we conclude that much less is known about the aggregate effects of social protection programs on the economy than is generally claimed. Within the very limited existing research, there is little evidence of a significant trade-off between social programs and labor market adjustment, although there is also not much evidence to support those who claim that social protection promotes economic growth. The paper ends by suggesting future research directions.

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This chapter was published in:
  • Rebecca M. Blank, 1994. "Social Protection versus Economic Flexibility: Is There a Trade-Off?," NBER Books, National Bureau of Economic Research, Inc, number blan94-1, July.
  • This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 11253.
    Handle: RePEc:nbr:nberch:11253
    Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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    1. Susan N. Houseman, 1991. "Industrial Restructuring with Job Security: The Case of European Steel," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number snh1991.
    2. Steven J. Davis, 1992. "Cross-Country Patterns of Change in Relative Wages," NBER Working Papers 4085, National Bureau of Economic Research, Inc.
    3. Katz, Lawrence F. & Meyer, Bruce D., 1990. "The impact of the potential duration of unemployment benefits on the duration of unemployment," Journal of Public Economics, Elsevier, vol. 41(1), pages 45-72, February.
    4. Peter Kemper & David A. Long & Craig Thornton, 1984. "A Benefit-Cost Analysis of the Supported Work Experiment," Mathematica Policy Research Reports e8742cc76cf54d9b961d6b088, Mathematica Policy Research.
    5. Robert H. Haveman & Barbara L. Wolfe, 1984. "Schooling and Economic Well-Being: The Role of Nonmarket Effects," Journal of Human Resources, University of Wisconsin Press, vol. 19(3), pages 377-407.
    6. Lindbeck, Assar & Snower, Dennis J., 1989. "Demand- and Supply-Side Policies and Unemployment: Policy Implications of the Insider-Outsider Approach," CEPR Discussion Papers 329, C.E.P.R. Discussion Papers.
    7. Hansen, G.D. & Imrohoroglu, A., 1990. "The Role Of Unemployment Insurance In An Economy With Liquidity Constraints And Moral Hazard," Papers 21, California Los Angeles - Applied Econometrics.
    8. Freeman, Richard B, 1988. "Evaluating the European View that the United States Has No Unemployment Problem," American Economic Review, American Economic Association, vol. 78(2), pages 294-99, May.
    9. Peter Gottschalk, 1993. "Is The Correlation In Welfare Participation Across Generations Spurious?," Boston College Working Papers in Economics 224, Boston College Department of Economics.
    10. Lawrence F. Katz & Gary W. Loveman & David G. Blanchflower, 1993. "A Comparison of Changes in the Structure of Wages," NBER Working Papers 4297, National Bureau of Economic Research, Inc.
    11. Atkinson, Anthony B & Micklewright, John, 1991. "Unemployment Compensation and Labor Market Transitions: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 29(4), pages 1679-1727, December.
    12. Lazear, Edward P, 1990. "Job Security Provisions and Employment," The Quarterly Journal of Economics, MIT Press, vol. 105(3), pages 699-726, August.
    13. W. Steven Barnett, 1992. "Benefits of Compensatory Preschool Education," Journal of Human Resources, University of Wisconsin Press, vol. 27(2), pages 279-312.
    14. Moffitt, Robert, 1992. "Incentive Effects of the U.S. Welfare System: A Review," Journal of Economic Literature, American Economic Association, vol. 30(1), pages 1-61, March.
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