DO EMPLOYMENT AND INCOME SECURITY CAUSE UNEMPLOYMENT - A COMPARATIVE-STUDY OF THE US AND THE E-4

High unemployment in Europe has led many economists and policy-makers to praise rapid job creation and low unemployment in the US and to cre dit its relatively unregulated labour markets for this success. We que stion the implication that Europe should adopt US-style labour market deregulation and flexibility. A detailed examination of the US and E-d r (French, German, Italian, and UK) data reveals almost no difference in unemployment rates for 'prime-age' males but large ones for other d emographic groups both within and among all countries (and not just be tween the US and the E-4). We also assess the impact of various employ ment regulations, wage-setting institutions, and income security polic ies on E-dr unemployment. We conclude that the evidence is mixed, and, more importantly, that the same institutions which may raise unemploy ment in Europe are also contributing to its more rapid earnings growth and greater earnings equality relative to the US. Thus, European labo ur market deregulation would at best be a very mixed blessing.