THE WEST-EUROPEAN EMPLOYMENT PROBLEM

The West European Employment Problem. - The most characteristic featur e of the unemployment experience in Western Europe is the inability of the unemployment rate to return to pre-shock levels. In addition to r ather restrictive demand management at various occasions, the main rea sons for this persistence of unemployment are probably the long-term p aths of real and relative wages, wide marginal tax wedges, disincentiv es to hiring and job search and possibly also an erosion of social nor ms against living off benefits. It is argued that a package of complem entary policy reforms is necessary to overcome the unemployment persis tence in Western Europe.