Journal of Economic Perspectives: Vol. 11 No. 3 (Summer 1997)


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Labor Market Rigidities: At the Root of Unemployment in Europe

Article Citation

Siebert, Horst. 1997. "Labor Market Rigidities: At the Root of Unemployment in Europe." Journal of Economic Perspectives, 11(3): 37-54.

DOI: 10.1257/jep.11.3.37


This paper studies the major institutional changes at the root of the increase in the west European unemployment trade in the last quarter century from below 3 percent to 11 percent. The institutional characteristics of wage bargaining and the legal rules hamper the self-equilibrating function of the labor market. The reservation wage, raised by the welfare state's rise, has affected the bargaining process, the wage level and the wage structure. Econometric evidence is presented. Since the mid-1980s, differences emerge, and the Scandinavian, the French-Mediterranean, the German, and the British-Dutch approach to the labor market can be distinguished.

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Siebert, Horst (Kiel Inst of World Econ, U Kiel, and German Council of Econ Advisers)

JEL Classifications

E24: Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital
J21: Labor Force and Employment, Size, and Structure
J64: Unemployment: Models, Duration, Incidence, and Job Search


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