[lbo-talk] Question: Source of High European/Relatively Low US Unemployment

Doug Henwood dhenwood at panix.com
Tue Mar 8 14:23:48 PST 2005


andie nachgeborenen wrote:


>Doug suggests that my initial supposition is not right
>and that this makes irrelevant the question of how to
>explain the correlation that isn't there. But isn't it
>there? It isn't as dramatic as I thought, but in 2003
>the US was two full percentage points below Europe in
>unemploymenrt, or to put it another way, 25% lower.
>That's way outside two standard deviations. Now, the
>phenomenon of high unemployment in low wage EU
>countries suggests that the Standard Economic
>Explanation of the difference isn't right (by itself),
>but there is still omething here to be explained.

Yes, there is, and I don't fully know the answer. But the standard explanations, which lump Europe into one single entity, obscure some important country differences, and the Sweden-US comparison really complicates the standard social democracy/liberal opposition too.

The standard line is more accurate in comparing Germany and France with the US - i.e., mostly corporatist models vs. the liberal icon. They've had to cope with fiscal and monetary austerity, the very opposite of the US - and both have trailed US experiments with consumer credit.

Robert Gordon <http://faculty-web.at.northwestern.edu/economics/gordon/2Cent-CEPR.pdf>, has a fairly conventional but non-excruciating comparison of Europe & the US that's worth reading on this topic. One important point: the US has allowed big box retailing (a major employer here, and a major contributor to the productivity acceleration) to thrive, while most of continental Europe has limited it.

Doug



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