Explain the fact that European countries have relatively higher unemployment rates than other OECD countries.

The first 200 words of this essay...

David Bell Caius Part II Dr.Baddeley

"Explain the fact that European countries have relatively higher unemployment rates than other OECD countries. Do these higher rates reflect constraints on labour market flexibility or have they emerged because Europe has been exposed to more shocks than some other OECD countries?"

Part of the problem in assessing unemployment trends across Europe is that there is not one single European experience. Some countries, such as the UK, have very similar labour market structures to the US: low minimum wage and unemployment insurance with increasingly inactive trade unions. There are others such as Sweden or France, which are far removed from these laissez-faire ideologies. Are the experiences of the different countries reflected by the labour market institutions? Or has unemployment in Europe been due to adverse shocks such as the Oil price shocks of the 1970s? The forefront of research into this question is the idea that it is a combined effect: the level of unemployment depends on how the labour market institutions respond to adverse shocks. That is, examining the persistence of unemployment trends from the previous period: this phenomenon has become known as unemployment hysteresis.

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