Investment Stimulation, with Some Reference to Housing

This paper is a follow-up on Section 5 of Drèze, Malinvaud et al.’s 1994 position paper on “Growth and Employment : The Scope for a European Initiative”, in favour of policies aiming to sustain demand through investments, without aggravating public deficits. We build on several recent papers to investigate further the argument. We first briefly review a non-standard theoretical model based upon contemporaneous thinking about incompleteness of markets, and its econometric validation. This analysis suggests that policies aimed at stimulating aggregate activity and supporting more optimistic expectations may be needed to achieve faster growth in economies suffering from persistent underutilistion of resources. We next elaborate on the principle of employment subsidies, with reference to housing. At times of severe unemployment, a correct evaluation of investment projects must take into account the wedge between the private and the social cost of labour. This labour cost distortion generates a discouting distortion. We briefly discuss both and derive implications for investment stimulation policies. We also review the main problems of implementation of a European investment program and report on a preliminary attempt at checking the applicability to housing in Wallony.

De l’optimalité des sytèmes d’assurance-chômage : quelques réflexions

La persistance du chômage et les problèmes budgétaires (en particulier en Belgique) rendent inévitable une réévaluation des avantages et inconvénients des systèmes d'assurance-chômage aujourd'hui en vigueur. Les éléments à prendre en compte sont multiples. La gestion efficace des risques de chômage est rendue difficile par toute une série de facteurs, tels que l'asymétrie d'information, le caractère macro-économique du risque, la segmentation du marché du travail, le pouvoir de marché dont peuvent disposer les entreprises ou les syndicats, les distorsions induites par les mécanismes de financement, etc. L'objectif de cette contribution est de passer en revue les résultats disponibles et de proposer ainsi quelques pistes de réflexions. Ces résultats montrent combien il faut se méfier de raisonnements trop simplistes. Une discussion correcte du bien-fondé d'un système d'assurance-chômage nécessite une approche globale, qui prenne en compte non seulement le montant et les conditions d'octroi des indemnités de chômage, mais aussi le mode de financement de la sécurité sociale et le mode de fonctionnement du marché du travail.

A complete decomposition of unemployment dynamics using longitudinal grouped duration data

In this paper, we study the unemployment dynamics in the Belgian regions, Flanders and Wallonia, on the basis of aggregate stratified data covering the period 1973-93. We decompose the aggregate exit probability from unemployment into calendar time and, both observed and unobserved, compositional effects. We find that changes in the inflow composition affect the cyclical fluctuations in unemployment duration only marginally. However, the long-run improvement in the quality of entrants into unemployment, notably in terms of educational attainment, mitigates the strong upward trend in this duration. This is a new result as none of the existing studies purges the trend in the aggregate outflow rate of the variation in its composition. We also conclude that in Belgium, incidence explains as much as 45% of the evolution of unemployment. Finally, the diverging evolution of unemployment across Flanders and Wallonia predominantly results from a stronger decline in the exit rates from unemployment in Wallonia