The European Unemployment Dilemma

Post‐World War II European welfare states experienced several decades of relatively low unemployment, followed by a plague of persistently high unemployment since the 1980s. We impute the higher unemployment to welfare states' diminished ability to cope with more turbulent economic times, such...

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Bibliographic Details
Published in:The Journal of political economy 1998-06, Vol.106 (3), p.514-550
Main Authors: Ljungqvist, Lars, Sargent, Thomas J.
Format: Article
Language:English
Subjects:
Economic change
Economic models
Economic theory
Employment
Europe
General economic equilibrium
Industrial structure
Information technology
Internationalization
Labor market
Labour market
Long term unemployment
Manufacturing
Political economy
Service industries
Service industry
Studies
Turbulence
Unemployment
Unemployment insurance
Wages
Welfare economics
Welfare state
Workforce
World War II
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Summary:Post‐World War II European welfare states experienced several decades of relatively low unemployment, followed by a plague of persistently high unemployment since the 1980s. We impute the higher unemployment to welfare states' diminished ability to cope with more turbulent economic times, such as the ongoing restructuring from manufacturing to the service industry, adoption of new information technologies, and a rapidly changing international economy. We use a general equilibrium search model in which workers accumulate skills on the job and lose skills during unemployment.
ISSN:0022-3808
1537-534X
1537-534X
DOI:10.1086/250020