Anatomy of Policy Complementarities

Mike Orszag () and Dennis Snower
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Mike Orszag: Towers Watson

No 41, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: The analysis provides a new explanation for two widespread problems concerning European unemployment policy: the disappointingly small effect of many past reform measures on unemployment, and the political difficulties in implementing more extensive reform programs. We argue that the heart of these problems may be the failure of many European governments to implement broad-based reform strategies. Our analysis suggests that major unemployment policies are characterised by economic complementarities (in the sense that the effectiveness of one policy depends on the implementation of other policies) and political complementarities (in that the ability to gain political consent for one policy depends on the acceptance of other policies). Under these circumstances, incremental, small-scale adjustments of existing policy packages are doomed to failure. Our analysis suggests instead that the European unemployment problem should be tackled through "broad" reforms that exploit the salient economic and political complementarities among individual policy measures.

Keywords: Labor market policy; economic complementarities; political economy; unemployment; unemployment benefits; taxation; inequality (search for similar items in EconPapers)
JEL-codes: E61 E62 H21 H23 H53 H55 H61 I30 J64 J68 (search for similar items in EconPapers)
Pages: 34 pages
Date: 1999-05
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Citations: View citations in EconPapers (18)

Published - published in: Swedish Economic Policy Review, 1998, 5(2), 303-343

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Related works:
Working Paper: Anatomy of Policy Complementarities (1998)
Working Paper: Anatomy of Policy Complementarities (1998)
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