Discussion Paper Details

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Title: Policy Complementarities: The Case for Fundamental Labour Market Reform

Author(s): David T Coe and Dennis J. Snower

Publication Date: February 1997

Keyword(s): Job Search, Job Security Legislation, Labour Market Institutions, Labour market policies, Labour Mobility, Minimum Wages, Payroll Taxes, Policy Complementarities, Skill Acquisition, Unemployment, Unemployment Benefits, Wage Bargaining and Welfare State Entitlements

Programme Area(s): Human Resources

Abstract: The paper analyses complementarities among a variety of labour market policies. It shows: (a) that a wide range of labour market institutions (e.g. unemployment benefits, job security legislation and payroll taxes) have complementary effects on unemployment; and thus (b) that policies aimed at reforming these institutions are also complementary. These policy complementarities imply that partial labour market reform (directed at one institution, while leaving the other institutions in place) is unlikely to achieve significant reductions in unemployment. Rather, labour market reform becomes particularly effective only once a broad range of institutional rigidities are dismantled simultaneously and the distributional objectives of the previous policies are pursued through more efficient means.

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Bibliographic Reference

Coe, D and Snower, D. 1997. 'Policy Complementarities: The Case for Fundamental Labour Market Reform'. London, Centre for Economic Policy Research.