Are institutional rigidities at the root of European unemployment?

Ronald Schettkat

Cambridge Journal of Economics, 2003, vol. 27, issue 6, 771-787

Abstract: The Netherlands experienced employment growth higher than that in the US and achieved an unemployment rate of less than 3%, but Germany's unemployment rate remained at high levels. A widely held view regards a distorted incentive structure in welfare states as the 'root of the European unemployment problem', but welfare state institutions in the Netherlands are more generous than the German ones. Therefore, differences in the incentive structures between the two economies cannot explain the differences in employment success. The reasons for this seem instead to be rooted in coordinated monetary, wage and fiscal policies in the Netherlands while these are incompatible policies in Germany. Copyright 2003, Oxford University Press.

Date: 2003
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