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Is the American model Miss World? Choosing between the Anglo-Saxon model and a European-style alternative

  • Henri de Groot

    ()

  • Richard Nahuis
  • Paul Tang

In Lisbon, the European Union has set itself the goal to become the most competitive economy in the world in 2010 without harming social cohesion and the environment. The motivation for introducing this target is the substantially higher GDP per capita of US citizens. The difference in income is mainly a difference in the number of hours worked per employee. In terms of productivity per hour and employment per inhabitant, several European countries score equally well or even better than the United States, while at the same time they outperform the United States with a more equal distribution of income. The European social models are at least as interesting as the US model that is often considered a role model. In an empirical analysis for OECD countries, we aim to unravel 'the secret of success'. Our regression results show that income redistribution (through a social security system) does not necessarily lead to lower participation and higher unemployment, provided that countries supplement it with active labour market policies. Especially, spending on employment services like job-search assistance and vocational guidance, seems effective. Furthermore, the results suggest that generous unemployment benefits of short duration contribute to employment without widening the income distribution.

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Paper provided by CPB Netherlands Bureau for Economic Policy Analysis in its series CPB Discussion Paper with number 40.

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Date of creation: Oct 2004
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Handle: RePEc:cpb:discus:40
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  1. Ruud de Mooij & Paul Tang, 2003. "Four futures of Europe," CPB Special Publication 49, CPB Netherlands Bureau for Economic Policy Analysis.
  2. Cecilia Garcia-Penalosa & Eve Caroli & Philippe Aghion, 1999. "Inequality and Economic Growth: The Perspective of the New Growth Theories," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1615-1660, December.
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  4. Belot, M.V.K. & van Ours, J.C., 2001. "Unemployment and Labor Market Institutions : An Empirical Analysis," Discussion Paper 2001-50, Tilburg University, Center for Economic Research.
  5. Richard Nahuis & Henri de Groot, 2003. "Rising skill premia; you ain't seen nothing yet?," CPB Discussion Paper 20, CPB Netherlands Bureau for Economic Policy Analysis.
  6. Nickell, S. & Layard, R., 1997. "Labour Market Institutions and Economic Performance," Papers 23, Centre for Economic Performance & Institute of Economics.
  7. Blanchard, Olivier & Wolfers, Justin, 2000. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," Economic Journal, Royal Economic Society, vol. 110(462), pages C1-33, March.
  8. Mattias Lundberg & Lyn Squire, 2003. "The simultaneous evolution of growth and inequality," Economic Journal, Royal Economic Society, vol. 113(487), pages 326-344, 04.
  9. Martin Neil Baily, 2001. "Macroeconomic Implications of the New Economy," Working Paper Series WP01-9, Peterson Institute for International Economics.
  10. John P. Martin, 1998. "What Works Among Active Labour Market Policies: Evidence From OECD Countries' Experiences," OECD Labour Market and Social Policy Occasional Papers 35, OECD Publishing.
  11. Belot, M.V.K., 2003. "Labor market institutions in OECD countries : Origins and consequences," Other publications TiSEM d9ec4bc4-0113-4677-a390-d, Tilburg University, School of Economics and Management.
  12. repec:ner:tilbur:urn:nbn:nl:ui:12-91545 is not listed on IDEAS
  13. Paul Cavelaars, 2003. "Has the tradeoff between productivity gains and job growth disappeared?," MEB Series (discontinued) 2003-12, Netherlands Central Bank, Monetary and Economic Policy Department.
  14. repec:ner:tilbur:urn:nbn:nl:ui:12-73836 is not listed on IDEAS
  15. Linda A. Bell & Richard B. Freeman, 2000. "The Incentive for Working Hard: Explaining Hours Worked Differences in the U.S. and Germany," NBER Working Papers 8051, National Bureau of Economic Research, Inc.
  16. Martin Neil Baily, 2001. "Macroeconomic implications of the new economy," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 201-268.
  17. Andersen, Torben M., 2004. "Challenges to the Scandinavian welfare model," European Journal of Political Economy, Elsevier, vol. 20(3), pages 743-754, September.
  18. Stephen Nickell, 1997. "Unemployment and Labor Market Rigidities: Europe versus North America," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 55-74, Summer.
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