Kiel Working Papers, Kiel Institute for World Economics
No 1526:
Incentives and Complementarities of Flexicurity
Alessio J. G. Brown and Dennis Snower
Abstract: This paper analyses how and to which degree the Danish
flexicurity concept and its various elements achieve the renowned Danish
miracle by evaluating their unemployment and inequality effects and their
complementarities. We develop a microfounded model of searching workers and
firms, calibrate it to Germany and perform the policy experiment of
implementing the full Danish flexicurity set of policies (low employment
protection, high unemployment benefits and workfare). Our results show that
implementing the Danish flexicurity concept in Germany would reduce
unemployment and earnings inequality substantially. Furthermore our
analysis illustrates that the Danish flexicurity policies have some
apparent complementarities in Germany - the reduction of unemployment
effect is nearly 40% greater when the policies are implemented in
conjunction than in isolation
Keywords: flexicurity; workfare, firing costs; employment; unemployment; (follow links to similar papers)
JEL-Codes: J64,; J65,; E24,; J22,; J32; (follow links to similar papers)
25 pages, June 2009
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