Solving the unemployment puzzle in Europe

A prize-winning essay in a competition organized by the European Investment Bank. The authors' analysis leads to the conclusion that high unemployment levels in Europe are largely due to structural rigidities in labour markets. They argue that a wide range of co-ordinated measures need to be put into place to fight unemployment, including those that improve economic incentives to work. In this context, they put forward the possibility of employment conditional schemes, such as the Earned Income Tax Credit (EITC) which, by giving a tax credit only if a person has a job, strengthens incentives to work without reducing the income of the unemployed.

• Primary Source

http://www.eib.org/attachments/efs/eibpapers/eibpapers_1999_v04_n02_en.pdf http://www.eib.org/attachments/efs/eibpapers/eibpapers_1999_v04_n02_en.pdf

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