Squandering European Labour: Social Safety Nets in Times of Economic Turbulence

Lars Ljungqvist

Scottish Journal of Political Economy, 1999, vol. 46, issue 4, 367-388

Abstract: This paper reviews the argument that high long‐term unemployment in Europe is caused by generous social safety nets in times of economic turbulence. We report on the empirical evidence of a more turbulent economic environment and present the theoretical arguments that establish a link between turbulence and high unemployment. We conclude that a cure to the European unemployment problem must entail a reform of the unemployment insurance system so that benefits decline over the unemployment spell. If the social consensus in Europe makes it difficult to implement declining benefits, we suggest that a complementary way of providing incentives for the unemployed would be to reduce their leisure by imposing work requirements.

Date: 1999
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Working Paper: Squandering European Labor: Social Safety Nets in Times of Economic Turbulence (1999)
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