Unemployment, Labor-Market Reform and Monetary Union

CES Working Paper at University of Munich No. 173

Posted: 8 Apr 1999

See all articles by Lars Calmfors

Lars Calmfors

Research Institute of Industrial Economics; IIES

Date Written: November 1998


The paper analyzes various mechanisms through which monetary union in Europe may affect unemployment. The focus is on the political incentives for labor-market reform. There will be more reform outside than inside the EMU to the extent that a national inflation bias can be reduced. But if there is a precautionary motive for low average unemployment in order to reduce the utility cost of macroeconomic variability, there could be more reform in monetary union. Labor-market reform to increase wage flexibility as a substitute for domestic monetary policy and transition costs of reform are also analyzed. The net effect of monetary union on unemployment is ambigous.

JEL Classification: E58, E69, F33, J29

Suggested Citation

Calmfors, Lars, Unemployment, Labor-Market Reform and Monetary Union (November 1998). CES Working Paper at University of Munich No. 173, Available at SSRN: https://ssrn.com/abstract=148470

Lars Calmfors (Contact Author)

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