On the efficiency of labor market reforms: How to solve the Spanish puzzle?

Stephen Sacht

No 2015-55, Economics Discussion Papers from Kiel Institute for the World Economy (IfW Kiel)

Abstract: In this paper we shed light on the relationship between labor market policy, entrepreneurship and youth unemployment prior to and in the aftermath of the global financial crisis in Spain. We discuss the situation, where labor market and macroeconomic policies were largely inefficient in reducing high levels of (youth) unemployment after 2007. We rise the question why in a situation of low inflation rates, an increase in (youth) unemployment had been observed although the labor market becomes more flexible due to the associated structural reform in 2010. We call this the Spanish Puzzle. The main reason for this observation can be found in the phenomena of downward nominal rigidity and the existence of a liquidity trap. Given the recovery of the Spanish economy in 2015, this development is grounded on (besides the increase in private consumption and a trade surplus) several policy measurements in order to strengthen entrepreneurial activity in 2013. The corresponding boost in private investment expenditure can be identified as the sustainable main driver for job creation in the long run.

Keywords: Spain; Labor Market Policy; Entrepreneurship; Youth Unemployment; Macroeconomic Policy (search for similar items in EconPapers)
JEL-codes: E24 E61 J13 L26 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-ent, nep-ger, nep-ino and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Journal Article: On the efficiency of labor market reforms: How to solve the Spanish puzzle? (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwedp:201555

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