Unemployment, Labour-market Reform and Monetary Union
CES, Munich, 1998
CES Working Paper No. 173
The paper analyses various mechanism through which monetray union in Europe may affect unemployment. The focus is on the political incentives for labour-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. Labour-market reform to increase wage flexibility as a substitute for domestic monetary union on unemployment is ambiguous.