Anatomy of Policy Complementarities

J. Michael Orszag and Dennis Snower
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J. Michael Orszag: Department of Economics, Birkbeck College, University of London, Postal: 7-15 Gresse Street, London W1P 2LL, UK

No 500, Working Paper Series from Research Institute of Industrial Economics

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 the difficulty may be the failure of many European governments to implement broad-based reform strategies. Our analysis suggests that major unemployment policies are characterized 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 manage to exploit the salient economic and political complementarities among individual policy measures.

Keywords: Unemployment; Complementarities; Political economy; Employment policy; 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: 54 pages
Date: 1998-06-23
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Citations: View citations in EconPapers (27)

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Related works:
Working Paper: Anatomy of Policy Complementarities (1999)
Working Paper: Anatomy of Policy Complementarities (1998)
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