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Inequality and InstabilityA Study of the World Economy Just Before the Great Crisis$
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James K. Galbraith

Print publication date: 2012

Print ISBN-13: 9780199855650

Published to Oxford Scholarship Online: April 2015

DOI: 10.1093/acprof:osobl/9780199855650.001.0001

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Inequality and Unemployment in Europe

Inequality and Unemployment in Europe

A Question of Levels

(p.165) Chapter 8 Inequality and Unemployment in Europe
Inequality and Instability

James K. Galbraith

Oxford University Press

This chapter focuses on Europe, the scene of economic integration, the creation of the European Economic Union, and the establishment of the Eurozone. Chronic high unemployment is argued to be widespread because of the rigid structure of the European labor markets. This chapter examines the notion that the rigid labor markets are associated with high unemployment, and whether such rigidity in the market shows little flexibility over time. However, analysis of the problem in terms of the whole European region instead of a per country basis avoids the notion of rigid wage structures. Wage fluctuation and flexibility also become apparent. Some studies even show that European countries with strongly compressed wage distributions enjoy significantly lower unemployment rates. Thus, the labor market rigidity explanation as the cause of chronic European high unemployment is wrong.

Keywords:   European Economic Union, Eurozone, rigid labor market, rigid wage structures

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