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Are labour market rigidities responsible for the unemployment rate observed in the United Kingdom and France? Free essay! Download now

Home > University > Economics > Are labour market rigidities responsible for the unemployment rate observed in the United Kingdom and France?

Are labour market rigidities responsible for the unemployment rate observed in the United Kingdom and France?

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Are labour market rigidities responsible for the unemployment rate observed in the United Kingdom and France? essay previewAre labour market rigidities responsible for the unemployment rate observed in the United Kingdom and France? essay previewAre labour market rigidities responsible for the unemployment rate observed in the United Kingdom and France? essay preview

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Whether labour market rigidities are responsible for the unemployment rate observed presently in England and the UK.

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Are labour market rigidities responsible for the unemployment rate observed in the United Kingdom and France?


LUBS 1610: Research Skills For Economists
200636808
Word Count : 2887

















Table of Contents


Introduction 3
Few facts and figures 4
Shifts in focus 4
Labour market institutions 4-5
The Economic Crisis 5-6
What do we know now? 6
Implications 6-7
Conclusion 7
Bibliography 8
Appendices
Appendix A 9
Appendix B 10
Appendix C 11
Appendix D 12
Appendix E 13
Appendix F 13
Appendix G
Figure 5 - Changes in GDP and Unemployment 14
Figure 6 - Employment Protection and Unemployment 14
Figure 7 – Changes in GDP and Unemployment 15
Appendix H 15



Introduction

European unemployment rates were high even before the economic crisis. Compared to the U.S, the European unemployment rate was always lower throughout the 1970s but has always been higher since the 1980s (Siebert, 1997). Saint-Paul (1996), states that “There is somewhat of a consensus among economists that labour market rigidities are responsible for high unemployment in Europe”. This quote highlights the fault to be within the labour market with the comparison between the U.S and Europe pointing towards the difference of flexibility of the labour market as the problem. Nickell (1997) quoted saying “The European job market is rigid and inflexible. Result: high unemployment. The North American job market is dynamic and flexible. Result: Low unemployment”. In contrast to the U.S, the labour market is stiffer in Europe is known to have stricter regulations. There were other plausible reasons for high unemployment, such as the oil shock in the 1970s or effects from technological change which could have seen unemployment rise. However Siebert (1997) indicated that the U.S also suffered similar experiences in their economy but did not suffer drastic changes in unemployment therefore it is justified to look at the institutional setting in Europe. These theories were however, over a decade old. Although this is the case, even with 30 years of data and clear differences in the evolution of unemployment, our knowledge of unemployment is still incomplete (Blanchard, 2006). The conventional view even now is that Europe is often presented as a single entity in the press and many professional papers (Howell, D. R., et al., 2006). Presently there are 27 members of the European Union and Blanchard (2006) explained that there is a large heterogeneity which leads to a misinterpretation of ‘European Unemployment’. This is proven by the fact that countries such as France, Spain and Italy averaged an unemployment rate of at least 9% in the last decade whilst Austria, Holland and Denmark at 4% or less (Appendix C) suggesting data must be used for individual countries to identify the cause of unemployment. This paper will therefore focus on two European countries, France and the UK, and will aim to ascertain whether labour market rigidities are responsible for the unemployment rate observed presently.

Few facts and figures

The unemployment rate observed in Appendix B before ...

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