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Technology and the Future of European Employment

Edited by Pascal Petit and Luc Soete

What is the potential of the new information and communication technologies? This book assesses the relationship between technological change and employment in all its dimensions, focusing on contemporary economies in Europe. The authors discuss patterns of growth, and the type of employment that countries might expect to be created following the introduction of these new technologies.
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Chapter 9: Unemployment and labour market flexibility: a misplaced question?

Donatella Gatti


9. Unemployment and labour market flexibility: a misplaced question? Donatella Gatti1 1. INTRODUCTION A major puzzle in current economic debate stems from the differences in observed rates of unemployment across developed countries. Economic analysis has generally focused on divergence in labour market organization (and flexibility) as the most plausible institutional explanation of this phenomenon (see, for instance, Layard et al., 1991). Labour market flexibility, in turn, is related to structural rigidities characterizing the wage bargaining system or the social security system. Therefore, from this perspective, the rise of (direct and indirect) workers’ social protection and the improvement in working conditions are seen as essential causes of increasing unemployment rates throughout western Europe (Layard et al., 1991; OECD, 1986). Hence, high unemployment must be understood as a ‘fair price’ that Europe has to pay in order to be able to keep, as a counterpart, a high workers’ protection legislation (CEPR, 1996). In contrast to this, a growing body of literature has been devoted to defining a more comprehensive approach to the comparative analysis of institutional arrangements and performances (see Aoki, 1986; Boyer, 1987; Soskice, 1990; Streeck, 1996). The main idea underlying contributions in this field is that a variety of (forms of) capitalism exists which defines several institutional models respectively characterizing existing industrialized countries. The main elements of these institutional settings involve both the internal organizational features of the firm and the whole environmental structure (that is, relationships with other firms and the ‘regime of competition’, nature and size...

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