Structural Unemployment in Luxembourg: Bad Luck or Rational Choice?

William Gbohoui

No 2019/243, IMF Working Papers from International Monetary Fund

Abstract: This paper combines both micro and macro approaches to identify the drivers of (un)employment and inactivity in Luxembourg. The young, low-skilled, and non-EU migrants are found to be the most vulnerable groups in the labor market. In addition to skills mismatches, work disincentives embedded in the tax-benefit system constitute a factor explaining structural unemployment. High unemployment of young and low-skilled workers reflects substantial unemployment traps, while disincentives for second earners (respectively the generosity of the pension system) contribute to lower labor market participation of women (respectively seniors). Further reduction of structural unemployment requires better integration of vulnerable groups into the labor market and improved targeting of benefits to make work more rewarding.

Keywords: WP; activity rate; labor market attachment; Luxembourg labor market; labor market participation; Participation; (Un)Employment; Work Incentives; Tax-Benefit System; Work-Welfare Trade-off; co-habiting worker; job search assistance; worker group; employment probability; labor market performance; labor market outcome; labor market in Luxembourg; labor market intervention; labor market prospects; Labor markets; Unemployment; Unemployment rate; Employment; Unemployment benefits; Global (search for similar items in EconPapers)
Pages: 42
Date: 2019-11-08
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Citations: View citations in EconPapers (1)

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