Anatomy of policy complementarities.

The analysis provides a new explanation for two widespread problems concerning European unemployment policy: the disappointingly small effect of many past reform measures on unemployment, and the political difficulties in implementing more extensive reform programs. We argue that the heart of these problems may be the failure of many European governments to implement broad-based reform strategies. Our analysis suggests that major unemployment policies are characterised by economic complementarities (in the sense that the effectiveness of one policy depends on the implementation of other policies) and political complementarities (in that the ability to gain political consent for one policy depends on the acceptance of other policies). Under these circumstances, incremental, small-scale adjustments of existing policy packages are doomed to failure. Our analysis suggests instead that the European unemployment problem should be tackled through ?broad? reforms that exploit the salient economic and political complementarities among individual policy measures.Arbeitsmarktpolitik; Beschäftigungspolitik; Theorie;

Health Accounts and Other Welfare Accounts

Gesundheitskosten, Gesundheitsfinanzierung, Health care costs, Health care financing

Hiring Risk and Labour Market Equilibrium

This paper introduces asymmetric information about workers' abilities into the turnover-training model of Phelps (1994) and Salop (1979). This makes hiring an investment under uncertainty. We show that an increase in the level of uncertainty reduces the rate of hiring, increases the optimal wage, and reduces steady-state employment. We conclude that the optimal rate of hiring by firms with hiring pools that have a proportionately high number of young workers is lower, and the rate of employment among these workers lower, since it is more difficult to predict their future performance. Also, the use of statistical discrimination is shown to increase employment because it reduces uncertainty about the ability of new hires. Conversely, anti-discrimination laws and quotas increase the rate of unemployment in this model.Hiring Costs; Incentive Wages; Quitting; Uncertainty

A Macro Theory of Employment Vouchers

This paper explores the optimal design of subsidies for hiring unemployed workers (‘employment vouchers’ for short) in the context of a simple macroeconomic model of the labour market. Focusing on the short-term and long-term effects of the vouchers on employment and unemployment, the analysis shows how the optimal policy depends on the rates of hiring and firing, and on the problems of displacement and deadweight. It also examines the roles of the government budget constraint and of the level of unemployment benefits in optimal policy design.Employment Policy; Government Budget Constraint; Unemployment Benefits