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Demand- and Supply-Side Policies and Unemployment: Policy Implications of the Insider-Outsider Approach

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  • Lindbeck, Assar
  • Snower, Dennis J.

Abstract

The paper analyzes a variety of government policies that can stimulate employment when unemployment is generated through the conflicting of interest between insiders and outsiders. It also provides guidelines for identifying policies that may be ineffective. We show how supply side policies can stimulate employment by raising worker productivity or reducing labor costs. Our analysis indicates that when wages and prices are flexible, product demand policies have no significant effect on employment unless these policies stimulate labor productivity, the entry of firms, capital utilization or investment.

Suggested Citation

  • 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.
  • Handle: RePEc:cpr:ceprdp:329
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    Cited by:

    1. Sabina Avdagic & Colin Crouch, 2015. "Symposium Introduction: Labour Market Reforms, Employment Performance, Employment Quality, and Changing Social Risks," British Journal of Industrial Relations, London School of Economics, vol. 53(1), pages 1-5, March.
    2. Rebecca M. Blank & Richard B. Freeman, 1994. "Evaluating the Connection between Social Protection and Economic Flexibility," NBER Chapters,in: Social Protection versus Economic Flexibility: Is There a Trade-Off?, pages 21-42 National Bureau of Economic Research, Inc.
    3. Fung, K.C. & C. Lin, Chelsea, 2005. "European Economic Integration and the Effectiveness of Employment Policies," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 20, pages 419-438.
    4. Rebecca M. Blank, 1997. "No Easy Answers: Comparative Labor Market Problems in the United States versus Europe," Economics Working Paper Archive wp_188, Levy Economics Institute.
    5. Muysken Joan & Zwick Thomas, 1996. "A note on incentive wages with human capital formation," Research Memorandum 012, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
    6. Jason Heyes & Paul Lewis, 2015. "Relied upon for the heavy lifting: can employment protection legislation reforms lead the EU out of the jobs crisis?," Industrial Relations Journal, Wiley Blackwell, vol. 46(2), pages 81-99, March.
    7. Aguiar, Alvaro & Ribeiro, Ana Paula, 2009. "Monetary policy and the transition costs of a labor market reform," Journal of Macroeconomics, Elsevier, vol. 31(4), pages 547-560, December.
    8. Tony Syme, 2000. "Public Policy and Unemployment in Interwar France: An Empirical Approach," Economics Series Working Papers 55, University of Oxford, Department of Economics.

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