This paper considers how the different varieties of capitalism affect the rate of long-term unemployment. The liberal market variety, where employment protection is the lowest, presents lower rates of long-term unemployment than the continental European and the Mediterranean varieties. In the latter both employment protection and long-term unemployment are the highest and labour market participation the lowest. The social-democratic Scandinavian variety gets the best of both worlds: low rates of long-term unemployment, high rates of labour participation, lower degree of inequality, with relatively high levels of employment protection. However the Scandinavian model may be hardly applicable in countries, such as the Mediterranean ones, where a sizable part of public opinion adheres to the three standard economic fallacies that are described in the appendix. Low rates of long-term unemployment and high levels of labour participation are also produced by the far-Eastern Asian variety, but at the cost of a markedly dualistic labour market structure.
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