The Gradual Transformation of Continental European Labor Markets: France and Germany Compared

35 Pages Posted: 3 Apr 2007

See all articles by Werner Eichhorst

Werner Eichhorst

Institute for the Study of Labor (IZA)

Date Written: March 2007

Abstract

Germany and France are both Continental European welfare states with severe labor market problems such as low employment and high and persistent unemployment which can be explained by labor market institutions that inhibit labor market adaptability. This paper analyzes recent reforms in core areas such as active and passive labor market policies, employment protection and the funding of social policies through taxes and social security contributions in both countries. It shows if and to what extent more favourable conditions for employment growth could be created. The paper identifies the limits of partial reforms in terms of the creation of more efficient labor market institutions although these reforms are highly plausible in politico-economic terms. However, the cumulative effect of sequences of marginal changes leads to a gradual medium-term transformation of both Continental European labor markets.

Keywords: Germany, France, labor market institutions, institutional changes, political economy

JEL Classification: J58, J68, J48

Suggested Citation

Eichhorst, Werner, The Gradual Transformation of Continental European Labor Markets: France and Germany Compared (March 2007). IZA Discussion Paper No. 2675. Available at SSRN: https://ssrn.com/abstract=977544

Werner Eichhorst (Contact Author)

Institute for the Study of Labor (IZA) ( email )

P.O. Box 7240
Bonn, D-53072
Germany

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