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The Economic Research Institute, Stockholm School of Economics SSE/EFI Working Paper Series in Economics and Finance

No 321:
Squandering European Labor: Social Safety Nets in Times of Economic Turbulence

Lars Ljungqvist ()

Abstract: This paper reviews the argument that high long-term unemployment in Europe is caused by generous social safety nets in times of economic turbulence. We report on the empirical evidence of a more turbulent economic environment and present the theoretical arguments that establish a link between turbulence and high unemployment. We conclude that a cure to the European unemployment problem must entail a reform of the unemployment insurance system so that benefits decline over the unemployment spell. If the social consensus in Europe makes it difficult to implement declining benefits, we suggest that a complementary way of providing incentives for the unemployed would be to reduce their leisure by imposing work requirements.

Keywords: European unemployment; economic turbulence; unemployment insurance; (follow links to similar papers)

JEL-Codes: E24; (follow links to similar papers)

30 pages, May 31, 1999

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This paper is published as:
Ljungqvist, Lars, (1999), 'Squandering European Labor: Social Safety Nets in Times of Economic Turbulence', Scottish Journal of Political Economy, Vol. 46, September, No. 4, pages 367-388



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