Anatomy of Policy Complementarities
CEPR Discussion Paper Series No. 1963
33 Pages Posted: 11 Dec 2000
Date Written: September 1998
Abstract
The analysis provides a new explanation for two widespread problems concerning European unemployment policy: the disappointingly small effect of many past reform measures on unemployment and the political difficulties in implementing more extensive reform programmes. We argue that the heart of the difficulty may be the failure of many European governments to implement broad-based reform strategies. Our analysis suggests that major unemployment policies are characterized by economic complementarities (in the sense that the effectiveness of one policy depends on the implementation of other policies) and political complementarities (in that the ability to gain political consent for one policy depends on the acceptance of other policies). Under these circumstances, incremental, small-scale adjustments of existing policy packages are doomed to failure. Our analysis suggests, instead, that the European unemployment problem should be tackled through "broad" reforms that manage to exploit the salient economic and political complementarities among individual policy measures.
JEL Classification: E61, E62, H21, H23, H53, H55, H61, I30, J64
Suggested Citation: Suggested Citation
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