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European Economic Integration and the Effectiveness of Employment Policies

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  • Fung, K. C.
  • Lin, Chelsea C.
  • Maechler, Andrea M.

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

  • Fung, K. C. & Lin, Chelsea C. & Maechler, Andrea M., 2003. "European Economic Integration and the Effectiveness of Employment Policies," Santa Cruz Center for International Economics, Working Paper Series qt0tp8k3c5, Center for International Economics, UC Santa Cruz.
    • Handle: RePEc:cdl:scciec:qt0tp8k3c5
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    References listed on IDEAS

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    1. Machin, Stephen & Manning, Alan, 1999. "The causes and consequences of longterm unemployment in Europe," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 47, pages 3085-3139, Elsevier.
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    More about this item

    Keywords

    European unemployment; economic integration; labor market;
    All these keywords.

    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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