Blanchard on European unemployment

Mark Thoma brings to our attention an important new paper by Olivier Blanchard on European unemployment:

Blanchard: "European Unemployment: The Evolution of Facts and Ideas"

This is a timely paper on unemployment in Europe that, with the appropriate degree of humility, asks what we do and don't know about persistently high average unemployment rates in Europe:

European Unemployment: The Evolution of Facts and Ideas, by Olivier Blanchard, NBER WP 11750, November 2005: Abstract In the 1970s, European unemployment started increasing. It increased further in the 1980s, to reach a plateau in the 1990s. It is still high today, although the average unemployment rate hides a high degree of heterogeneity across countries. The focus of researchers and policy makers was initially on the role of shocks. As unemployment remained high, the focus has progressively shifted to institutions. This paper reviews the interaction of facts and theories, and gives a tentative assessment of what we know and what we still do not know. [free September Version] [free October version] See also "Explaining European Unemployment."

For comments see Mark's post, and also Brad DeLong's post on the Blanchard paper

Comments

[Kirk H. Sowell]

Having not read the paper, I would say as a general observation that the flexibility of labor laws is the main factor in explaining differences between European states - between, say, Britain and the Netherlands on the one hand, and France and Germany on the other. They have many of the same social welfare services, but not the same labor regulation regime.