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Author: | Berthold, N. Fehn, R. |
Title: | Does EMU promote labor-market reforms? |
Journal: | Kyklos
1998 : VOL. 51:4, p. 509-536 |
Index terms: | EUROPEAN MONETARY SYSTEM LABOUR MARKETS LABOUR LAW UNEMPLOYMENT INFLATION |
Language: | eng |
Abstract: | The present paper discusses whether EMU will promote labor- market reforms. It is shown that labor-market reforms carry a double dividend: not only structural unemployment but also equilibrium inflation is decreased. However, as long as labor-market reforms are implemented nationally, the latter effect in not present in EMU so that EMU does not work in favor of labor-market reforms. This result is reinforced if the existence of nominal rigidities is considered. A contrary effect arises if EMU by itself increases structural unemployment. Yet, this positive effect of EMU on labor- market reforms is seriously compromised if the increase in structural unemployment inside EMU in caused by the possibility for participating countries to produce negative fiscal externalities. |
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