- Dennis Snower, and S. Henry
- Published Date:
- January 1997
© 1996 International Monetary Fund
Library of Congress Cataloging-in-Publication Data
Economic policies and unemployment dynamics in Europe / S.G.B.
Henry, Dennis J. Snower, editors.
Includes bibliographical references.
1. Unemployment—Europe. 2. Labor policy—Europe. 3. Labor Market—Europe I. Henry, S.G.B. II. Snower, Dennis J.
The cover and interior of this book were designed by the IMF Graphics Section.
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Over the Last two decades, there has been a marked and persistent increase in unemployment in many Western European countries. Joblessness has risen with every cyclical downturn, but has failed to decline back to its prerecession levels during the subsequent economic recoveries, leading to a gradual ratcheting up of the unemployment rate. The high unemployment that now prevails in most of Western Europe has many costs: forgone output, loss of human capital, and a heavy burden on the public finances. From the perspective of the IMF, another important concern would be that a failure to solve the problems in European labor markets might eventually undermine the present commitment to sound monetary and fiscal policies. While a return to the more active macroeconomic policies of the past would be met with no enduring success in reducing unemployment, it would significantly increase economic and financial instability.
The studies in this volume attempt to advance the understanding of the relationship between economic policies and the dynamics of unemployment in five large European countries within a common methodological framework, in the hope of contributing to the design of policies aimed at durably reducing unemployment. While the studies generally confirm earlier findings of a link between unemployment and policies that increase labor market rigidities and blunt incentives, they also highlight the fact that the labor market often responds to changes in policies with a surprisingly long lag. Thus, both the detrimental effects of increasing labor market rigidities, and the beneficial effects of reducing them, typically take a considerable time to make themselves felt. We believe that in the public debate on policies to reduce unemployment, a greater awareness of these lags would help to shift the focus away from “quick fixes” and toward a more patient and steady approach to implementing labor market reforms.
In addition to the editors and the other authors of the papers, many people in the IMF have contributed to the production of this book. In particular, I wish to thank Jacques Artus, Willem Buiter, Flemming Larsen, and Leslie Lipschitz for their comments on the papers and Susan J. Becker, Patricia Gillett-Lorusso, Xiaoning Gong, Alison McCaul, Luzmaria Monasi, Fritz Pierre-Louis, and Jolanta Stefanska for research assistance. Thanks are also due to Elisa Diehl of the External Relations Department, who provided editorial assistance and coordinated production.
European I Department
S.G.B. Henry and Dennis J. Snower
Paolo Mauro and Tessa van der Willigen
Karl F. Habermeier and S.G.B. Henry
Charalambos A. Christofides
S.G.B. Henry and Marika Karanasson
Jeffrey R. Franks