Is Europe Sick?
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Robert C Shelburne
Europe's economic performance has deteriorated continuously over the last two decades both in terms of its unemployment and its labor force participation rate; more recently its productivity has declined relative to the United States. This is due to a complex interaction between the how these welfare states are designed, the institutions created by the European Union, idiosyncratic factors resulting from linguistic differences, population dynamics and other cultural factors, and an increasing emphasis on non-economic objectives. Although structural reforms can provide a solution, it will be a long, difficult and costly process. A more successful approach involves a redesign of the macroeconomic framework in Europe. Aggregate demand stimulation should be given priority since it will not only increase employment directly, but, by slightly raising inflation, will allow negative real interest rates and separate real wages movements from nominal wages. More generally, EU institutions appear to have been designed assuming a perfect world; instead these need to be designed around existing national institutions and cultural practices.
©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
Articles in the same Issue
- Article
- Is Europe Sick?
- Market-Driven Regionalization in Asia
- Asian Reserves and the Dollar: Is Gradual Adjustment Possible?
- Trade Policies of the Former Centrally Planned Economies
- Foreign Trade in Environmental Products; The WTO Regulations and Environmental Programs
- African Apparel Exports, AGOA, and the Trade Preference Illusion
Articles in the same Issue
- Article
- Is Europe Sick?
- Market-Driven Regionalization in Asia
- Asian Reserves and the Dollar: Is Gradual Adjustment Possible?
- Trade Policies of the Former Centrally Planned Economies
- Foreign Trade in Environmental Products; The WTO Regulations and Environmental Programs
- African Apparel Exports, AGOA, and the Trade Preference Illusion
