Working Paper: NBER ID: w11750
Authors: Olivier Blanchard
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.
Keywords: European unemployment; labor market institutions; economic shocks; unemployment duration; policy implications
JEL Codes: E24; J6
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| oil price increases (Q31) | increase in unemployment (J64) |
| increase in unemployment (J64) | increase in natural rate of unemployment (J64) |
| labor market institutions (J08) | increase in unemployment rates (J64) |
| unemployment insurance and employment protection (J65) | increase in duration of unemployment (J64) |
| high unemployment duration (J64) | decrease in employability (J63) |
| shocks initiated rise in unemployment (J64) | institutions maintain high unemployment levels (J68) |