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Economics in the EU

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Does labor market flexibility raise employment levels? Discuss in relation to experiences of EU15 countries since 1980 (Either analysis of one/two countries or cross-section analysis across EU15 pre-2004 economies)

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Today, most of the developing countries are adopting policies to create labor market flexibility in order to decrease the unemployment rates and boost their economic growth. Labor policies in East and Central Europe used to be determined by old socio-economic institutional legacies that are aimed to shield welfare and give extensive social and economic protections to the workers. During 1980s, most of these countries experienced a sudden decrease in economic growth with increasing unemployment rates while many Western European countries did unusually well.

France, Belgium and Germany increased the job security provisions during 1970s and this created important increases in their unemployment rates during the late 1970s and early 1980s. In Spain, the economic system used to centrally set the prices, wages and output targets of the organizations. Most of these job security policies were creating negative effects on the employment and activity rates and the country had the highest unemployment rate among the OECD countries. The labor market reform in Spain started in the middle of 1980s. Many firms started to use temporary or fixed term contracts which included less firing costs. In a few years the country increased the level of temporary employment to the highest in Europe. ...

Solution Summary

Economics in the EU are studied.

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