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Institutions and performance in European labour markets: taking a fresh look at evidence

  • Alfonso Arpaia
  • Gilles Mourre

This paper presents a selective survey of the recent literature on labour market institutions and performance and offers new empirical EU-based evidence on the impact of labour market reforms on employment and labour market adjustment. While the literature traditionally treats labour market institutions as exogenous, attention shifted recently towards understanding the underlying causes of specific institutional arrangements. As a consequence, the literature highlights the great importance of an efficient policy design exploiting these interactions wisely and identifies general principles for achieving an efficient policy design at both macro and micro levels. While empirical evidence does no show a major change in terms of intensity of labour market reform after the setting of the Economic and Monetary Union and the creation of the euro, the reforms aiming at strengthening the labour market attachment of vulnerable groups tend to have been successful both in raising their employment and increasing labour market adjustment.

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Paper provided by Directorate General Economic and Financial Affairs (DG ECFIN), European Commission in its series European Economy - Economic Papers with number 391.

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Length: 51 pages
Date of creation: Nov 2009
Date of revision:
Handle: RePEc:euf:ecopap:0391
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