Participants 
 
Working programme 
 
Working Groups 
 
Publications
 
Working Group I 
 
Working Group II 
 
Working Group III 
 
Working Group IV
Publications 
 

Most of the papers can be downloaded as Portable Document Format (pdf) files. The Adobe Acrobat reader which is needed for reading pdf-files can be obtained free from Adobe in English, French and German
Papers not available as files can be ordered from the coordination assistant Jacqueline Runje, Tel: +49-421-218-7534, Fax:  +49-421-2184-597, e-mail: jrunje@ewig.uni-bremen.de. 
 
1. All papers by author (alphabetical order) 
2. All papers according to the working groups with abstracts and PDF 
 
1. All publications by author:
  
Name Title Paper number1 
Altvater, Elmar Ecological sustainabilty, productivity and employment II/10
Altvater, Elmar World economy, the financial crisis and ecological sustainability - A trilemma II/16
Andreff, Wladimir The prospect of the European Union enlargement to the East for Employment II/25
Arestis, Philip/ 
McCauley, Kevin/ 
Sawyer, Malcolm
An alternative stability and growth pact for the European Union II/19
Barbier, Jean-Claude La logique du "workfare" dans les politiques sociales en Europe et aux Etats Unis: Limites des analyses universalistes I/8
Blaas, Wolfgang From full employment to zero inflation: Stages of economic policy I/9
Carrasco, Cristina/ 
Mayordomo, Maribel
Tiempos, trabajos y organizacion social: Reflexiones en torno al mercado laboral femenino I/10
Catenaro, M./Lossani, M./Natale, P./Tirell, P. Institutional design and policy in the European Monetary Union: What has been done? What is left to do?  II/23
Cainelli, Giulio/ Fabbri, 
Roberto/Pini, Paolo
Performance-related pay or pay for participation? Forms of agreement and determinants: Evidence from companies in Emilia-Romagna III/13
Dahlström, Gösta Critical review of present economic policies: Price stability priority without welfare losses II/1
Dahlström, Gösta Observations from recent research on investment and capital formation II/8
Dahlström, Gösta Notes on the role of fiscal policy in interplay with monetary conditions II/11
Dahlström, Gösta Macroeconomic policy strategy for full employment in Europe, Proposals for alternative fiscal measures in interplay with monetary conditions II/17
Etxezarreta, Miren About the concept of full employment: A limited 'survey' I/11
Grahl, John Emergency changes in monetary policy II/2
Grahl, John The monetary constitution of the European Union II/12
Grahl, John Money as Sovereignity: The economics of Michel Aglietta II/13
Hoang-Ngoc, Liêm Full employment and working time reduction - Some lessons from the French debate on employment policy III/1
Hoang-Ngoc, Liêm Les politiques actives de l'emploi en France: Objectifs, résultats, perspectives III/8
Hoang-Ngoc, Liêm La réduction de la durée collective du travail comme instrument de politique de l'emploi en France III/11
Huffschmid, Jörg Financial liberalisation and economic policy  II/5
Huffschmid, Jörg Protecion of alternative economic policy against financial disruption and instability II/7
Huffschmid, Jörg Restauration of financial stability - An agenda for the centre rather than the periphery II/14
Husson, Michel Employment performances in Europe: The conditions of success III/15
Ioakimoglou, Elias Nairu depends on inflation, An alternative specification of the wage equation I/12
Karamessini, Maria/ Kaminioti, Olympia Labour market segmentation in Greece: Historical perspective and recent trends I/2
Kleinknecht, Alfred/ 
Oostendorp, Remco/ 
Pradhan Menno
Flexible labour, firm growth and employment III/5
Kleinknecht, Alfred Effective demand and technological innovation - A note on why Keynes was more right than he thought III/7
Kleinknecht, Alfred Is wage restraint harmful to innovation? - Critical notes on the Dutch employment miracle IV/1
Kostaki, Anastasia/ 
Ioakimoglou, Elias
Demographic factors affecting long-term unemployment in Greece - A logistic regression analysis I/7
Marano, Angelo The road to sound public finances: Economic growth vs. primary surplus II/20
Matzner, Egon The crisis of the welfare state I/4
Matzner, Egon The mono-polar world order. From the fall of the iron curtain to US dominance  I/13
Mazier, Jacques/ 
Couharde Cécile
The equilibrium exchange rate of European Currencies and the transition to a single currency II/3
Mazier, Jacques Rehabiliter la demande et repenser les politiques structurelle II/18
Meidner, Rudolf An alternative design of macroeconomic policies aiming and restoring full employment II/9
Michie, Jonathan Labour flexibility and innovative investment III/4
Michie, Jonathan/ 
Sheehan, Maura
No innovation without representation? An analysis of participation, representation, R&D and innovation III/9
Milios, Jannis/ 
Ioakimoglou, Elias
Who's afraid of work? (Unemployment and the "end of labour") I/1
Nadel, Henri Une critique de la "fin du travail" I/3
Nadel,  Henri The crisis of the social democratic state: From Fordism to globalisation I/14
Pedersen, Jörgen Economic growth and its regional distribution. Harmonization and unequal development in Euroland III/12
Pedersen, Jörgen/ 
Hansen, Annegreth
The politicisation of technology: Policy between big business and public movements IV/2
Petit, Pascal The reconstruction of full employment I/6
Pini, Paolo/Piacentini, Paolo Internal demand and labour income: A note on the role of >Employment Multiplier<  II/4
Pini, Paolo/Piacentini, Paolo Growth, productivity and employment: Do income distribution and internal components of demand matter? II/6
Recio, Albert  Employment and unemployment, From an egalitarian point of view  I/5
Tamborini, Roberto Living in the Emu: Prices, interest rates and the adjustment of payments in a monetary union II/21
Schratzenstaller, Margit International divergence, international progressivity and the revenue system of the EU II/15
Spangenberg, Joachim H./Omann, Ines/ 
Hinterberger, Friedrich
Sustainability, growth and employment in an alternative European economic policy II/24
Toporowski, Jan Monetary policy and capital market inflation in Europe II/22
Walterskirchen, Erwald The relationship between growth, employment and unemployment in the EU I/15
Weissel, Erwin Austria's long road to tripartite bargaining - The role of preconditions, chance and intent III/2
Weissel, Erwin Employment policy in a microeconomic perspective. The erosion of the classical employment contract III/3
Weissel, Erwin Employment through working-time policy, A neo-capitalist test approach III/10
Weissel, Erwin Employment through working-time policy, A neo-capitalist test approach (Revised, expanded version) III/14
 The number refers to the respective abstract number, see point 2. 
 

 2. All papers: According to the working groups with abstracts and PDF 



 
 

Working Group I

 

Working paper No. I/1

Jannis Milios, Elias Ioakimoglou 
(National Technical University of Athens) 

Who’s Afraid of Work ? 
(Unemployment and the "end of labour") 

Abstract 
The paper deals with the tradition and theoretical content of and the empirical evidence for the „end of labour" thesis in economic literature. It is shown that this thesis has already been the subject of sharp controversies about a hundred years ago and that there are certain parallels to these discussions in more recent versions brought forward by Rifkin and Gorz. Subsequently in examining the statistical data for the US, Japan and the EU the paper finds that there is no statistical evidence for the thesis. Rising unemployment is not the result of the „end of labour" but of slow growth and neoliberal economic policy, which uses the thesis as an ideological smoke-screen. 

 

All papers 


Working paper No. I/2

Maria Karamessini* and Olympia Kaminioti** 
(*Centre of Planning and Economic Research, **National Employment Observatory) 

Labour Market Segmentation in Greece: Historical Perspective and Recent Trends 

Abstract 
Labour market segmentation in Greece is a historical phenomenon linked to the gradual formation of internal labour markets in big companies between 1970 and 1985 and the process of informalisation of large parts of the industrial structure as a response of tiny firms to problems of competitiveness during the crisis. The fragmentation of internal labour markets and the shed of labour by big firms since the mid eighties has probably led to the attenuation of segmentation in jobs. On the other hand, the results from our quantitative analysis of Labour Force Survey data for the recent period illustrate a clear trend between 1987 and 1994 towards the segmentation of the labour force, especially along the young/old divide. This finding suggests that the move towards grater flexibility of the Greek labour market and the reduction of union power during this period has not equalised employment insecurity among the different categories of the labour force but has increased the inequality of risk around a higher average of insecurity for all. 

(This paper was presented to the TSER meeting in Athens on June 11-12, 1998. It was also published as discussion paper no.69 of the Centre of Planning and Economic Research, Athens) 

 All papers 


Working paper No. I/3

Henri Nadel 
(Groupe d’Étude et de Recherche sur la Régulation et les Mutations de l’Économie Mondiale, Université Paris 7) 

Une critique de la "fin du travail" 

Abstract 
The paper deals with the thesis that persisting unemployment is a result of technological progress which leads to the „end of labour". The argument, which is usually accompanied by the proposal for a basic income is examined and criticised on theoretical and empirical grounds. This raises the question of the causes for the different patterns of employment and unemployment in the main capitalist zones. The paper examines the three main approaches to this problem - the orthodox, the technological and the institutionalist explanation - and comes to the conclusion, that the latter has the highest explanatory power, particularly with regard to the persistently high level of unemployment in Europe. 

 All papers 


Working Paper I/4

Egon Matzner 
(Max-Weber-Kolleg, University of Erfurt) 

The crisis of the Welfare state 

Abstract 
Starting with a short explanation of the reasons for the State activity, the paper then goes on to explore the reasons for its weakening and the importance of the new socio-economic context in this respect. - Taking the later into account, the paper proceeds to study the considerations that could guide a policy decision maker wishing to pursue a policy aiming at full employment in a welfare state in a globalised national economy. For this study the author considers that Game Theory may be a useful tool and uses it to analyse the new situations according to the different economic agents and their cooperative or non cooperative attitudes. The author purpose to observe that negative-sum games are currently replacing positive-sum ones and therefore considers that staging positive-sum games is a primary objective of politics. He then goes on to consider the difficulties in introducing the cooperation mode and presents some views about how a socio-economic context encouraging cooperation could be built. 

 All papers 


Working Paper No. I/5

Albert Recio 

Employment and Unemployment, from an Egalitarian Point of View 

Abstract 
The paper starts with the aim to explain the structural change taking place in the labour market since the crisis of the seventies. It considers there can be detected two types of explanations: those that do not relate it to social elements but to techno-productive factors, and those that consider the economic policy of the last decades as the bases of the problem. After explaining and commenting critically the first interpretation the author proceeds to develop the second one considering that they exemplify the reaction of capital to the egalitarian demands stimulated by the full employment of the sixties. Therefore he pays attention not only to macroeconomic policy elements but also to changes in the forms of organisation and business strategies. The thesis of 'the end of labour' is also revised and rejected on empirical bases and considering the significance of other elements on unemployment. Then the neoliberal model of economic policy is studied and the questions of its reproductibility, its hidden costs and its externalities are contemplated. Because of them the model is revealed in its strong negative elements and rejected even if it is ascertained that for partial elements it may appear as successful, thing that makes more difficult its replacement. Then the question of employment is reformulated with an alternative socio-economic framework including sustainability and the need to integrate productive and reproductive spheres of human activity. 

 

Working Paper No. I/6

Pascal Petit 
(CEPREMAP, Paris) 

The Reconstruction of Full Employment 

Abstract 
The paper examines the reasons why the cyclical appearance and disappearance of mass unemployment, analysed in the theory of the political business cycle by N. Kalecki, has been more and more replaced by a long term trend of rising unemployment, although the question of full employment has not disappeared from the political agenda. As an explanatory pattern two newly emerging dividing structures are brought forward: the increasing differentiation between the behaviour and interests of financial vs. poductive capital on the one hand and the growing gap between qualified and unqualified gap, on the other. The establishment and consolidation of this new sector specific and qualification specific structures requires a new and more differentiated approach to the adequate reconstruction of a full employment strategy. 

 All papers 


Working Paper No. I/7

Anastasia Kostaki and Elias Ioakimoglou 
(National Technical University of Athens) 

Demographic Factors Affecting Long-term Unemployment in Greece - A Logistic Regression Analysis 

Abstract 
Our aim is to investigate the effect of demographic characteristics such as gender, marital status, age and educational level, on long-term unemployment. A detailed analysis is undertaken of the influence of these characteristics, making use of a statistical model of logistic regression. For the purposes of this analysis, primary data was used from the Labour Force Survey for the year 1994 (more recent primary data are not available). We find that the pool of long-term unemployed (in this paper we refer to "long-term unemployment" for a period of time >24 months) is becoming increasingly prevalent among the total figures for the unemployed. The probability of being a long-term unemployed depends on age, gender and marital status, but not on educational level. The most seriously exposed to the danger of long-term unemployment are women aged between 30 and 44, whether single or married. It should nevertheless be noted that the probability of remaining unemployed for an extended period is higher than average for all women --albeit not as high as in the case of women aged between 30 and 44. Men, by contrast, appear to be better protected from long-term unemployment than the other groups in the population. It is interesting that there should be such asymmetry between the two sexes as regards marriage. There is a higher probability for single men of being unemployed for extended periods than there is in the case of married men. The incidence of long-term unemployment increases for men above the age of 45 years. We comment that long-term unemployment in Greece seems to be related, first, to "family strategies" concerning paid and unpaid work, and second, gender segregation and unequal opportunities resulting from employers' preferences. Unexpectedly, the influence of educational level does not show up as significant. 

 All papers 


Working paper No. I/8

Jean-Claude Barbier  
(Université Paris VII) 

La Logique du "Workfare" dans les Politiques Sociales en Europe et aux Etats Unis: Limites des Analyses Universalistes 

Abstract 
The paper analyses social and welfare policies in Europe and compares them with the development in the US. The objective is to warn against a premature generalisation of  the concept of workfare as developed in the USA as a forerunner of European policies. It is necessary to take account of the different historical contexts and institutional frameworks of social and labour market policies. On the basis of these theoretical considerations the paper analyses the cases of  “workfare” in the United States, “welfare to work” and “New Deal” in the United Kingdom and “insertion” in  France. Whereas the number of persons in workfare programmes is a small minority of  the poor in the US, the relative number is much larger in the UK. In both cases the purpose is to procure jobs to the beneficiaries as rapidly as possible, regardless of the quality and remuneration of these jobs. In contrast the French policy of “insertion” is embedded in a wider ensemble of labour market and social policies which maintains basic rights of the individuals. The paper argues that the broader problems raised by specific labour market policies concern the autonomy and freedom of choice for the individuals, the number and relevance of the persons in those programmes and the  quality of the programmes in terms of their contribution to social integration. 

 All papers 


Working Paper I/9

Wolfgang Blaas  
(Vienna University of Technolgy ) 

From Full Employment to Zero Inflation: Stages of Economic Policy 

Abstract 
The paper analyses the paradigmatic shift from full employment  in the postwar period to zero inflation as economic policy orientation at the end of the century.  In using a simple evolutionary framework based an a Kaleckian approach it interprets the coalition between workers and industrial capitalists  as the basis of the full employment period from 1950 – 1965 and – after a period of transition – the coalition between industrial and financial capitalists as the underlying power structure  of the zero inflation pattern. The economic consequences of this shift are negative growth-interest rate differentials and high unemployment. The paper concludes with deliberations about the possibility to restore growth and full employment under present circumstances. 

 All papers 


Working Paper I/10

Cristina Carassco y Maribel Mayordomo  
(Universidad de Barcelona) 

Tiempos, Trabajos Y Organizacion Social: Reflexiones En Torno Al Mercado Laboral Femenino 

Abstract 
The article presents an analysis about the labour market of women in Spain by means of the statistical instrument usually used for labour studies - the Labour Force Survey (Encuesta de Población Activa, in Spanish terms) -. The work shows that the Labour Force Survey is a statistic that reflects the non explicit assumption held by economic theoretical models, that is, the accaptation of the family model 'man, head of family/woman, housewife' and the sexual division of labour. As a result, domestic work ends up reducing itself to the category of 'non-work' and the labour participation of women as a 'secondary' type of labour. It is postulated that the best way to understand social reality is by means of an approach that embodies the totality of a social-economic process that takes part in the process of social reproduction, making explicitly visible the reproductive mechanism of the population, and particularly, of the labour force. 

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Working Paper I/11

Miren Etxezarreta  
(Universitat Autónoma de  Barcelona) 

About the Concept of Full Employment: A limited 'survey' 

Abstract 
The objective of this paper is to synthetics and present the main issues related with a critical evaluation of the traditional concept of full employment and the main elements that should be considered to incorporate the new circumstances. Also to assess critically the unqualified and unprecise use which is being made of the concept in order to diminish the importance of unemployment. The paper starts with a revision of the traditional concept of full employment, inquiries into the statistical computation of it and dwells into the ideological options that .. to maintain a specific concept of full employment, exposing also the problems that arises between the concept and the statistical computation. It then revises the elements that seem to lead to the need for an redefinition of the concept and supports the view of the need for a broad consideration of what employment implies. Finally a few aspects that should be taken into account for a redefinition can and should be improved to account for new developments in the labour market, the limitations in the employment policies are not so much a question of the shortcomings of the definition but of political and social willingness to address the problem of unemployment. 

 All papers 


Working Paper I/12

Elias Ioakimoglou 
(Institute of Labour, General Confederation of Greek Labour, Athens) 

NAIRU depends on inflation, An alternative specification of th wage equation 

Abstract 
 This paper focuses on the specification of wage equations from which estimations of the equilibrium rate of unemployment - either the Natural Rate of Unemployment or the Non Accelerating Inflation Rate of Unemployment - are derived. We argue that the nominal wage claims of trade unions or individual workers, depending on the balance of power between labourers and enterprises, have been inadequately specified in the wage equation. Taking into account the stickiness of money wages when inflation is low, an alternative specification of the wage equation is derived leading to an inflation dependent equilibrium rate of unemployment, that is a long term Phillips Curve which is not vertical and a NAIRU depending on inflation. 
 
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Working Paper I/13

Egon Matzner 
(University of Erfurt) 

The Mono-Polar World Order. From the Fall of the Iron Curtain to US Dominance 

Abstract 
Alternative economic policies for Europe rest on institutional reform which allows changes in policies on the national as well as the transnational levels. The centre of reform suggested is the international monetary system. Potential actors of reform are the EU in cooperation with Japan. Both could negotiate a compromise with the USA.--  The paper discusses whether a new less crisis – prone International Financial Architecture is likely to be introduced soon. The USA, the largest net benefitting country of the present system, so far is only prepared to improve the “early warning” as well as the “containment” of crises. Given the present dominance of the USA – its cores are discerned – and its ability to form allies it is rather unlikely that a basic reform will be achieved in the near future. 

 All papers 


Working Paper I/14

Henri Nadel  
(Université Paris, Denis-Diderot) 

The Crisis of the Social Democratic State: From Fordism to Globalisation 

Abstract 
The Welfare State as the form of the modern democratic capitalist State is an interpretation very often met in the literature. The paper uses the "Régulation" aproach to analyse the passed charcateritics of the involvment of the state in the economy. The role played in the fordist period by this involvment is emphasized. The legitimacy of the State, as Welfare state being a key point. Coming to the present situation of financial driven global economy, the question of the ability of the Welfare State in creating conditions for full employment reconstruction in Europe are brought to debate. 
 
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Working Paper I/15

Erwald Walterskirchen  
(Austrian Institute of Economic Research) 

The Relationship between Growth, Employment and Unemployment in the EU 

Abstract 
In this paper, the macroeconomic links between economic growth and the labour market are analysed. The relationship between GDP growth and the change in unemployment ("Okun's law") is divided into two components: 
• the connection between economic growth and the change in employment (Verdoorn/Kaldor) and 
• the relationship between the change in employment and unemployment rates. 
The first relationship is governed mainly by economic factors, the second one by demographic influences and labour market policies. 
Two methods were adopted: 
a) time-series analysis for individual EU countries, 
b) international cross-country analysis for the period 1988-98. 
Some of the empirical results are: 
• There is still a strong and positive correlation between GDP-growth and the change in employment. But employment, of course, will rise only if economic growth rates are outstripping productivity gains. 
• There is a negative correlation between changes in employment and unemployment, but certainly not 1:1. This relation may be obscured by political and social factors: Changes in active labour market policies (e.g. in East Germany or Sweden) alter the relationship between unemployment and employment substantially. 
• An increase in labour supply tends to raise employment and dampen productivity increases significantly. Similar to these increases in labour supply is the effect of high unemployment rates. 
• A rise in labour-intensive domestic demand affects employment much more than an increase in capital-intensive exports. The rather poor labour market performance of some export-oriented countries (e.g. Germany) may be partly explained by this fact. 
• Lower real wages tend to improve international competitiveness, but they hardly alter the labour-intensity of production (in the short and medium term). 
• The increase in part-time employment (e.g. Netherlands) obscures the correlation between GDP and employment. It is useful to run correlations between economic growth and full-time- equivalent-employment. 
There is a strong negative correlation between real output growth and the change in the unemployment rates in time-series and in cross-country analyses. The simple-minded argument that there cannot be a negative relation between economic growth and unemployment, because both are rising in the long run, is of course completely wrong. 

 All papers 


Working Group II

 

Working paper No. II/1

Gösta Dahlström 
(Consultant in Economics) 

Critical Review of Present Economic Policies: Price Stability Priority without Welfare Losses 

Abstract 
The overriding problem of European economic developments is the high rate of unemployment, slow economic growth and insufficient investment propensity. In the chain process of stagnation one cannot single out one specific mechanism or initial factor for an explanation. This paper deals mainly with monetary policies, which are designed in a short-term perspective and - according to mainstream thinking - solely to the defence of price stability. The destructive role of monetary policies in the past has not appeared in the short run but through interaction in the long run with job destruction, further public deficits and government budget consolidation programmes. Attention is called to an empirical study by Mikael Apel and Per Jansson, in which advanced statistical methods were used to estimate NAIRU and the output gap in the Swedish economy from primary data between 1970 and 1996. The results indicate that the cyclical component of unemployment was important and still is, in contradiction to many political statements about proper measures to take. This is shown by a direct comparison with OECD estimates of output gaps in Sweden. There is a large and systematic deviation. The inflationary pressures of increasing demand, output and employment have been overestimated to the extent that OECD estimates have been influential. The method used by Apel-Jansson has now become applied by the central bank of Sweden in monitoring relevant tendencies for monetary policies targeted at price stability. This paper also discusses ways and means to supplement further the monitoring of relevant data for monetary policies with a view to establish a common forum for monetary and fiscal policy analysis. Thus, causal links leading to a vicious circle ending in unnecessary stagnation and output losses in the medium and long terms could be circumvented. 

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Working paper No. II/2

John Grahl 
(Business School, University of North London) 

Emergency Changes in Monetary Policy 

Abstract 
Financial problems may be a serious constraint on monetary policy in general and monetary disinflation in particular. This is suggested: by the history of central banking; by the outcome of experiments in monetary base control, which may be considered a high frequency analogue of more general issues in monetary policy; and by several recent episodes where financial emergency seems to have led to changes in national or international policies. Partly because its investigative and model-building procedures are not well adapted to the exploration of such episodes, financial constraints on macroeconomic policy may be underestimated in the literature of contemporary economics. 

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Working paper No. II/3

Jacques Mazier & Cécile Couharde 
(U.F.R. de Sciences Économiques et de Gestion Lab. CÉDI, Université Paris Nord) 

The Equilibrium Exchange Rate of European Currencies and the Transition to a Single Currency 

Abstract 
For the development of the forthcoming monetary union and the policy of the European Central Bank the question of exchange rates of the EURO against US$ and Yen plays a paramount role. The paper takes up and discusses critically two recent approaches to the calculation of an equilibrium exchange rate. It raises methodological objections against the analytical framework of Aglietta and undertakes own calculations on the basis of a modified Williamson approach. On the basis of these calculations it appears that presently the currencies forming the future EURO are undervalued by about 5% - 10%, whereas the US$ is overvalued by about 12% in terms of their respective equilibrium rates. In the second part the role of unit costs as an essential basis for competitiveness and exchange rates is discussed with regard to methodological basis and empirical evidence. The observable convergence in unit costs amongst the members of the monetary union involves contrasting developments and may not be stable with regard to mounting pressures within the MU. 

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Working paper No. II/4

Paolo Pini & Paolo Piacentini 
(Dpto. di Scienze Economiche, Università degli Studi di Bologna & Dpto. di Ricerche Economiche e Sociali, Università di Cagliari) 

Internal Demand and Labour Income: a Note on the Role of >Employment Multiplier< 

Abstract 
The paper suggests an accounting scheme of the impact of demand side factors, i.e. growth, composition and distribution of income, on the determination of changes in the aggregate balance of employment. The level of employment warranted in a system is here derived from the application of a simple scheme which we have called, following the contributions of Richard Kahn and John Maynard Keynes in the ‘30s, the "employment multiplier". Starting from an accounting identity between the values of aggregate supply and demand, a level of "warranted" employment is derived, given the labour coefficient and the deflated values of final demand, in which autonomous components are distinguished from an induced component, this latter depending on total labour income. Thus, the variations of aggregate employment for a country can be decomposed into the effects of the contributions of three components: growth of average productivity of labour, growth of "autonomous" demand components, and variations of the "multiplier", a term which summarises the impact of wage share and consumption propensity on induced demand and again on the level of overall employment. On the basis of this framework, we have worked out a quantitative assessment with temporal comparison within a national context. The aim has been to rebuild the employment pattern for seven European countries "warranted" on the factors indicated above, with specific timing in the period 1960-1995 required in identifying differential behaviours of the relation between employment growth and production growth. 

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Working paper No. II/5

Jörg Huffschmid 
(Institute for European Economy and Economic Policy, University of Bremen) 

Financial Liberalisation and Economic Policy 

Abstract 
The paper deals with the relationship between the modern liberalised financial sector and economic policy from three angles. Firstly financial liberalisation (national deregulation and privatisation as well as international liberalisation) as the main feature of the modern financial sector is itself a result of a particular economic policy response to increased accumulation problems in the 1970s. Secondly, the main lever for the strength of the financial sector with regard to economic policy is the easy and cheap exit-option. In displaying this option financial agents impose a particular austerity prone economic policy course upon governments, thereby generating on the one hand macroeconomic slow growth and high unemployment and on the other hand specific systemic risks and crises of the financial sector with widespread sector and regional contagion effects. Thirdly, in order to stimulate growth and employment it is therefore important to regain control over the financial sector. A first step can be the improvement of crisis prevention (extension of bank supervision) and crisis management. But in the long run the prospects for reintegration of the financial sector depend on a thorough change in the domestic policy orientation: a shift from the aggressive fight for world market superiority towards an internationally coordinated type of development opens the way for balanced cooperative international relations which undermine the perspectives for short term speculative flows. The problem of transition from one type to the other cannot be resolved by a nation state alone, and the preconditions for global cooperation are at present not given. In this situation the EU has the historical chance to opt for a strategy of a protected avant-garde: it is strong enough to implement an economic policy change and to protect it against external turbulence and attacks. However, for the immediate future the main task will be to stabilise the transition to and the working of monetary union against speculative attacks which are to be expected before it begins. While the introduction of a foreign exchange transaction tax is particularly apt for the defence against regular speculation it will not be sufficient to fight off fundamental speculation. For this case the revitalisation (according to Art. 73f of the Treaty on European Union) of capital controls and the unambiguous definition of thresholds for their use are advisable if the objective of monetary union is taken seriously. 

 All papers 


Working paper No. II/6

Paolo Pini & Paolo Piacentini 
(Dpto. di Scienze Economiche, Università degli Studi di Bologna & Dpto. di Ricerche Economiche e Sociali, Università di Cagliari) 

Growth, Productivity and Employment: Do Income Distribution and Internal Components of Demand Matter? 

tables 

Abstract 
The paper considers the macroeconomic relationships between employment, technology and growth, focusing on the role of internal demand component and income distribution. The debate on the technological causes of the jobless growth and on the intensity of the well-known compensation mechanisms is considered from this point of view. It is argued that the recent growth path of the industrialised economies, started at the beginning of the eighties, does not show the rise in its employment intensity pointed out by some authors. The evidence seems to suggest, on the contrary, a decrease in the ratio between employment growth and value added growth - both at the aggregate and sectoral level - for many European countries, in particular since the second half of the eighties and nineties. The virtuous circle between demand growth and productivity growth favourable to employment dynamics, which characterised the sixties and seventies, does not emerge anymore in the last fifteen years, when a negative relation between employment dynamics and productivity growth appears. On the basis of some empirical research adopting the cumulative growth model of the "regulation school" (with internal and external causation mechanisms) for the period 1960-1990, this change seems to be explained by the decreased intensity of endogenous compensation mechanisms, such as changes in income distribution, and changes in important macroeconomic relationships between investment, consumption, and net export. Finally, the paper proposes a quantitative assessment for the more recent years (1991-1995) of the impact of demand side factors, i.e. growth, composition and distribution of income, on the determination of changes in the aggregate balance of employment. The level of employment warranted in a system is here derived from the application of a simple scheme which we have called, following the contributions of Richard Kahn and John Maynard Keynes, the "employment multiplier". Starting from an accounting identity between the values of aggregate supply and demand, a level of "warranted" employment is derived, given the labour coefficient and the deflated values of final demand, in which autonomous components are distinguished from an induced component, this latter depending on total labour income. Thus, the variations of aggregate employment for a country can be decomposed into the effects of the contributions of three components: growth of average productivity of labour, growth of "autonomous" demand components, and variations of the "multiplier", a term which summarises the impact of wage share and consumption propensity on induced demand and again on the level of overall employment. 

All papers 


Working paper No. II/7

Jörg Huffschmid 
(Institute for European Economy and Economic Policy, University of Bremen) 

Protection of alternative economic policy against financial disruption and instability 

Abstract 
The paper discusses four groups of risks to financial stability in Europe: contagion effects from external crises, world-wide macroeconomic imbalances, capital flight as reaction to a new economic policy orientation and moral hazard and other risky behaviour of banks and financial institutions. The political measures to cope with these risks include enhancement of bank supervision and its extension to other financial institutions as well as Euromarkets and off-shore centres, risk reduction and restriction of trade in secondary markets and derivatives activities, tax-based or administrative capital controls and an enlarged role for monetary policy in the management of financial crises. The underlying assumption is, that the EU is in a position to undertake such measures on her own and if she does so, this will exert healthy pressure for more global coordination and monetary cooperation. 

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Working Paper No. II/8

Gösta Dahlström 
(Consultant in Economics) 

Observations from Recent Research on Investment and Capital Formation 

Abstract 
The paper contains summaries of some study reports on investments and capital, which have been presented recently in research publications in economics. One case refers to a contribution from 1987, which dealt in depth with the investment function in macroeconomic modelling. The selected studies form a biased group and cannot be seen as representative of trends in ongoing research on investment, capital and growth. The studies comprise important empirical observations, inter alia on choice of PPPs as an alternative to conventional exchange rates in cross-country comparisons of investments and on significantly changed conclusions when the capital stock concept is broadened to include certain services and human capital investments. One study dealt with capital retirement at the micro level, using very detailed data about additions and reductions to the stock of physical capital, leading to close insight into cyclical behaviour of retirement. Instead of a constant depreciation of the capital stock it might be better to treat at least part of depreciation as an endogenous variable. An earlier study on the investment function by the EC Economic Policy Committee marked progress in modelling the investment block for the macroeconomic analysis by including simultaneously all three important determining factors for physical investment. The paper observes the major results of this study and comments on the shift in macroeconomic target evaluations between the mid-1980´s and the 1990´s. From findings in some other studies the paper attempts to analyse and draw conclusions regarding suitable new regular information sources concerning the status, changes and typical flexibility mechanisms in labour markets and regarding capital stock building and technology absorption. 

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Working Paper No. II/9

Rudolf Meidner 

An Alternative Design of Macroeconomic Policies Aiming and Restoring Full Employment 

Abstract 
The paper starts with the assessment that the most prominent cause for the high unemployment in Sweden is the change of economic policy priorities from full employment to price stability at the beginning of the 1990s. It then briefly examines the Swedish National plan for promoting employment before engaging in a systematic treatment of the means and ways to create new jobs. Here the emphasis is put on measures to stimulate private consumption primarily in the low-income brackets. In the second place active industrial and regional policies are recommended, whereas the lowering of labour costs and the deregulation and flexibilisation of labour markets can only in specific cases be helpful. The reduction of labour supply through the reduction of working time is regarded as a defensive measure, which can not serve as a general tool or employment creation. Working time reductions should rather be treated as a goal in itself which may and - if properly engineered - will have positive employment side-effects. As a result it is stated that the combination of a modestly expansionist general economic policy and well targeted selective and structural measures can lead to full employment again. 

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Working Paper II/10

Elmar Altvater 
(Free University of Berlin) 

Ecological Sustainability, Productivity and Employment 

Abstract 
I begin this paper with some considerations about the relationship between ecological scarcity, productivity, and democratic participation. In the following I show that productivity increase, ecological deterioration and the substitution of living labour by fossil energy and fixed capital are the outcome of the same logics which underly economic development. In the next paragraph the concept of sustainability is analysed with regard to employment policies. In this section it is necessary to bring in the contradiction between living labour and monied capital. The financial turmoil has negative consequences on employment as well as on the environment. Therefore policies of full employment, cannot only create jobs for unemployed persons, but also contribute to the protection of the environment in a positive way. The price, however, is slackened productivity growth, so long as it is measured in traditional forms. Therefore at the end a proposal for another concept of productivity is submitted which takes the life cycle of the product and not only the value produced into account. 

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Working Paper No. II/11

Gösta Dahlström 
(Consultant in Economics) 

Notes on the Rôle of Fiscal Policy in Interplay with Monetary Conditions 

Abstract 
Fiscal and budgetary policies play a central rôle in the political debate and macroeconomic analysis in every industrial country. Economic integration, globalization of markets, trade and investment are gradually reducing the freedom of action nationwise regarding macroeconomic management. The formal separation of monetary and fiscal policymaking within the EU has not yet created an impulse for effective fiscal policy at the international level. A forceful common fiscal policy and/or an effective coordination of national budgetary policy is missing. However, in practical operation consensus and mutual understanding as well as common bases of knowledge and analysis are not outlawed. Just now a constellation develops where ECB is signalling that inflationary pressures are not imminent. New initiatives for output and income acceleration would be welcomed. The paper refers to one example of harsh criticism regarding the restrictiveness of fiscal policy during the years since 1994, taken from Sweden. Similar controversies could certainly be noted elsewhere. Monetary policy was also restrictive. Actual developments indicate a clear neglect of employment targets and priority for budget consolidation and public debt shrinkage. An extended presentation is made in the paper of marginal employment incentive schemes (MEI), as these provide an opportunity for small, open economies to act even in view of demand leakages, public budget restrictions and volatility of the cross-border financial flows. Positive and negative effects are dealt with. MEI schemes may form a modest, ”all-weather” compatible instrument for growth injection. 

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Working Paper II/12

John Grahl 
(Business School, University of North London) 

The Monetary Constitution of the European Union 

Abstract 
There is both economic and political concern about the rigidity of the initial constitution of the ECB. This paper takes as its premise the view that formal and rapid change to  the constitution is hardly likely and asks the question, "what gradual and Informal changes are possible and/or desirable?" Three areas of potential development are identified: procedural and strategic choices within the ECB itself to avoid excessive rigidities; the strengthening of the ECB's political interlocutors in the Council-11 and the Parliament; the formulation of a stronger and more coordinated fiscal authority. 

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 Working Paper  II/13 
John Grahl 
(Business School, University of North London) 

Money as Sovereignty: the Economics of Michel Aglietta 

Abstract 
The work of Michel Aglietta with André Orléan includes two systematic attempts to construct an anthropology of money, as a necessary step in constructing a "monetary theory of markets" opposed to the orthodox "market theories of money". This paper undertakes a critical survey of these two attempts and relates them to Aglietta's rich and varied writings on substantive monetary questions. It is argued that this literature offers insights and analyses of considerable value in the development of Keynesian theory. 

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Working Paper No. II/14

Jörg Huffschmid 
(Institute for European Economy and Economic Policy, University of Bremen) 

Restauration of Financial Stability - An Agenda for the Centre rather than the Periphery 

Abstract 
The paper thematises the causes of the recent financial crises in Asia and draws conclusions as to measures to restore financial stability. It argues that the roots of the financial crises were not primarily the weaknesses of the financial sectors in the crisis countries but in the first line the abundant liquidity which was generated as profits in the capitalist centres and was looking for attractive investment opportunities. Weak demand and budget restrictions in the USA and the EU drove this money into the Asian countries where it created unrest and turmoil. A strategy to restore financial stability should therefore restrict capital flows from the centres to the periphery, via taxation, cash deposit requirement or outright capital controls. In the centres themselves the discrimination of  secondary markets and short term investment should be considered as well as isolation or even prohibition of some kinds of derivative trade. In the field of exchange rate stabilisation regional monetary systems along the pattern  of the EMS are recommended which would co-operate with each other. In the last instance the restoration of financial stability requires a change in economic policy in order to prevent the generation of excess capital. 

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Working Paper No. II/15

Margit Schratzenstaller 
(University of Giessen ) 

International Divergence, International Progressivity and the Revenue System of the EU 

Abstract 
Within the European Union policies to support real convergence across the member states are limited to the expenditures. This article concentrates on the revenue side of the European fiscal system. First international convergence as a policy goal is discussed and the most important shortcomings of the current European fiscal system with respect to the problem of international divergence are identified. We also try to formulate some tractable concept of international progressivity within federal fiscal systems. Based on these deliberations some alternatives to the current European revenue system are discussed to find out whether they are more appropriate to realize international progressivity. 

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Working Paper No. II/16

Elmar Altvater  
(Free University of Berlin) 

Growth, Productivity Employment and Ecological Sustainability - a "Globalization Trilemma" 

Abstract 
This paper builds on the paper delivered at the TMR workshop in Vienna 1998 and on a speech during the TMR-workshop in Brussels in October 1999. There the relationship between ecological constraints and employment or: whether the policy objectives of ecological sustainability and employment growth contradict each other or not explicitly were on the agenda. This paper tries to exhibit the trilemma situation of economic policy between growth of GNP  (employment), increase of productivity (competitiveness) and ecological constraints (sustainablity) in times of globalization. 
This is a preliminary version, it still has  to be fixed by a native speaker. 

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Working Paper No. II/17

Gösta Dahlström 
(Nacka, Sweden) 

Macroeconomic policy strategy for full employment in Europe, Proposals for alternative fiscal measures in interplay with monetary conditions 

Abstract 
This paper is designed as a draft and suggestion for a chapter on fiscal policy in the final report of the Network group working with the TSER project No. 3252 on "Full employment".  -  The suggested draft is structured in the following way: 

1. The monetary and fiscal policy constitution of the EU 
2. Historical review of macroeconomic policy regimes 
3. Model strategy of fiscal and budget policies at European union level 
4. Remarks on analytical tools for coordinated fiscal-monetary policy management 
5. Basic reforms of institution, of economic structure and legislation 

Some key statistics on unemployment, employment, business cycle tendency and monetary conditions in various industrial countries are presented in Part 3. 

The preparations for the EMU  third phase have included budget consolidation signalled by annual Broad Guidelines during a long period in the 1990´s. Restrictive monetary policies accompanied this approach, more so in the early phase and less later. These elements have restrained the European economy and aggravated the unemployment and labour market crisis. The situation when the euro area now is in operation has been analysed in the Network group and this paper tries to merge ideas from various group contributions. The matter is presented as a scrutiny of the new constitution at work in practice. The interplay between monetary and fiscal policies is important for securing a desirable and effective macroeconomic development. Independence and judgment priority of the monetary actor should not imply freezing drastically the use of fiscal and budget instruments for growth, employment and better resource utilisation by national governments. The forthcoming practice of the Stabilisation and Growth Pact (SGP) is one important element. 

Assuming that formal changes of the Treaty are presently out of question, the paper deals with the issue how to act in practice in order to elicit effective monetary and fiscal policies in interplay, thereby minimizing deadlocks but promoting growth, employment and stability. It is suggested that the Council, assisted by the Commission, inspires and takes initiatives for coordination of fiscal and budget policies, taking the interplay with monetary conditions for stability into account and allowing Member state governments control of budget planning in a scenario of joint efforts for growth and high employment. The paper indicates situations where it would be wise to circumvent the SGP pact. The latter should not now be reduced to a dead letter but it seems now to be a rude instrument with undesirable effects in some situations. 

The starting period of the euro area has been harmonious in the sense that monetary conditions have not been an obstacle to expansive fiscal measures for economic activity. On the contrary, the ECB has given signals that increased real economic growth would be welcome in the form of repo rate reductions in two steps. This has not led to responses from the fiscal policy side for obvious reasons. The individual single state cannot see a positive outcome of fiscal boasts to demand, which in most cases is the correct statement. Joint EU initiatives for coordination of expansive fiscal measures have been missing. The paper summarizes ideas in Network group contributions regarding steps towards such coordinated measures in interplay with stability-oriented monetary 

conditions. The depreciation of the euro, which is leading to economic stimulus in the European sphere, has probably contributed to elicit the recent increase of the ECB repo rate. 

The paper is also presenting contributions of the group regarding tools for economic analysis which have been brought forward in recent research and seem more or less well adapted to the special situation of persistent  mass unemployment in Europe in a scenario of globalisation.  -  For obvious reasons - the broad and politico-economic character of the chosen objective of the Network group - there exists not only consensus but also differences of opinion, ideology and priorities within the group. Therefore, space for special and opposing views will have to be included in the final report. The present draft is passing by this difficulty. 
 
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Working Paper No. II/18

Jacques Mazier 
(CEDI, Université de Pairs 13) 

Rehabiliter la demande et repenser les politiques structurelles 

Abstract 
The European Union (EU) in its present form is the ideal institutional framework for liberal economists. A single market without State, an independent European Central Bank (ECB) without democratic control, national States bound both by the Stability Pact and by the European competition policy, financial markets acting as referee. Most of the problems of the Monetary Union are without clear answer: macroeconomic policy co-ordination, adjustment mechanisms relying mainly on the labour market, risk of fiscal competition between States. The EU is acting de facto as a Union at several speeds and the future enlargement will increase the risk of dilution. But in a global economy dominated by a financial mode of regulation Europe is partially protected as euro has put an end to intra-european instability factors. The Euroland is a little opened area which appears more autonomous. The medium term outlooks are better than what it was feared one year ago. The low rates of interest have improved the economic situation. In spite of the Stability Pact the fiscal policies would not be too tightened. After the households’ demand, investment would start to grow. The depreciation of euro since January 1999 and the appreciation of the dollar have played a balanced role between the two areas. The soft lending of the US economy and the recovery in Asia would create a good international climate. In this context a slow decrease of the European unemployment would be possible. The employment situation is already far better in some European countries, although the quality of employment must be questioned. This can explain why the freezing of the economic policy at the European level does not seem too worrying. This situation can continue as long as crisis will not reappear, revealing the incapacity of Europe to find appropriate answers. The different choices of European economic policy are shortly examined in this paper. 
 
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Working Paper No. II/19

Philip Arestis*, Kevin McCauley**and Malcolm Sawyer*** 
(*University of  East London, **University of  East London, *** University of Leeds) 

An Alternative Stability and Growth Pact for the European Union  
 
Abstract 
The main purpose of this paper is to propose an alternative stability and growth pact amongst European Union (EU) governments to underpin the introduction of a single currency and a single market within the EU. It begins by critically examining the Stability and Growth Pact, which has accompanied the introduction of euro in January 1999, which has not received a great deal of attention in the policy debates on the euro or in the related literature. This is followed by a discussion of the institutional underpinnings of the euro, and it is argued that the institutional arrangements underpinning the euro (such as the ECB) have a number of weaknesses. An alternative pact governing monetary and fiscal policy is then proposed, which requires the creation of new institutions. A final section summarises and concludes. 

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Working Paper No. II/20

Angelo Marano  
(Politecnico di Milano) 

The Road to Sound Public Finances: Economic Growth vs. Primary Surplus    
 
Abstract 
Countries in the EMU are back in control of their public finances: deficits are below 3%, debts are approaching 60% “at a satisfactory pace”. However, a further correction is needed in order to comply with the Stability Pact provision of “a medium-term budgetary objective of positions close to balance or in surplus”. Consider four countries: France and Germany must rise their primary surplus above 2%, while Italy and Belgium, due to their higher debt, have targets above 5%. I simulate the effects on debt and deficit of a fiscal policy aimed at increasing economic growth in these four countries, rather than focusing all the effort on primary surplus. Such policy is coherent with sound public finances and a stable, or even strongly decreasing, debt/GDP ratio. If a 1% reduction of primary surplus rose structural GDP growth by 0.5 points, deficit and debt would continue falling in all countries, and the spirit of the Stability Pact would be respected, the transition to a balanced budget being only longer. If a 2% reduction of primary surplus rose structural GDP growth by 1 point, still in Italy and Belgium deficit would converge to 0 and debt would fall in 11 years by about 30 points of GDP. In Germany and France debt would stabilize at 60%, with deficits surpassing 3%, but then returning below. In this case the Stability Pact would be violated, not so the Maastricht Treaty. Debt financing of public investments would be allowed, as suggested by the “golden rule” of public finance. 

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Working Paper No. II/21

Roberto Tamborini 
(University of Trento) 

Living in the Emu: Prices, Interest Rates and the Adjustment of Payments in a Monetrary Union    
 
Abstract 
Balance-of-payments problems for the EMU member-countries will not vanish by virtue of the use of a single currency. This paper discusses two aspects of the adjustment of payments in a monetary union that may have major reprecussions for the EMU countries, for their policy makers and for the Union's institutional design. The first aspect concerns the role of national banking systems in the adjustment process. The second is the role of changes in general price levels, and hence in the terms of trade. The two aspectes are interconnected. Besides some structural features that may hinder changes in interest rates and in the terms of trade in the EMU, the presence of institutional commitments of member-countries that may work perversely is also considered. 

J.E.L. E4, E5 

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Working Paper No. II/22

Jan Toprowski  
(South Bank University) 

Monetary Policy and Capital Market Inflation in Europe  
 
Abstract 
The initiation of a period of capital market inflation in Europe is altering the scope and effectiveness of monetary policy in Europe.  The theory of capital market inflation argues that the values of long-term securities markets are determined by a disequilibrium inflow of funds into those markets.  The resulting over-capitalization of companies leads to increased fragility of banking and undermines monetary policy and stable relationships between short and long term interest rates, such as that postulated by Keynes in his theory of the speculative demand for money.  Moreover, while the increased fragility of banking is an immediate effect, capital market inflation also creates an unstable Ponzi financing structure in the capital market as a whole.  The Maastricht framework for monetary policy makes it difficult to avoid the financial instability caused by by such inflation. 

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Working Paper No. II/23

M. Catenaro*, M. Lossani**, P. Natale***, P. Tirelli**** 
(*University of  Turin,**Catholic University, Milan, *** University of Milan-Bicocca, ****University of Milan-Bicocca) 

Institutional Design and Policy in the European Monetary Union: What has been done? What is left to do?   
 
Abstract 
The paper address three issues stemming from the very institutional arrangements selected for the conduct of monetary and fiscal policy within the European Union. The Maastricht Treaty sets price stability as the sole objective of monetary policy and assigns to the ECB the task of achieving it. The Stability and Growth Pact imposes a ceiling on the amount of debt countries can run, leaving at the same time room for countercyclical fiscal policy. Are these approaches to fiscal and monetary stance mutually consistent? Do we need a co-ordination of fiscal and monetary policies? Our answer is a qualified yes. Many have argued that the ECB should be assigned an explicit inflation target. It is well know that in an economy affected by supply shock, price stability can be achieved at no cost in terms of output stabilisation by adopting an inflation-targeting regime. Still, this result ignores the role of fiscal policy. By delegating monetary policy to an independent and target-conservative central bank, i.e. by designing a regime of uncoordinated fiscal and monetary stance, society exposes itself to excessive inflation volatility. We show that by delegating monetary policy to a central bank who cares only about inflation, while fiscal authorities retain some degree of flexibility in the use of debt and tax policy for stabilisation purposes, society can achieve the desired goal of curbing inflation expectation without sacrificing output stabilisation, even absent co-ordinated fiscal and monetary actions. The Maastricht Treaty and the Stability and Growth Pact are often referred to as the pillars monetary and fiscal policy in Europe should rest on. Still, they present a peculiar asymmetry: within the Union, monetary policy is centralise while fiscal policy is decentralised. Is this the way it should be? Some scholars have observed that decentralised fiscal policies may give rise to an expenditure bias within the Union. Others have remarked that when fiscal authorities are aware that output distortions caused by a tax increase are offset by an inflation rise, co-ordination of the former can only exacerbate the ensuing inflation bias. When supply shocks are taken into account, co-ordination of fiscal polices to stabilisation purposes can only be beneficial, any impact on expectations being absent by definition. The above benefits should be balanced against the costs highlighted in the literature. The balance itself depends upon the selected monetary regime. The more sensitive is monetary policy to price stability, the more beneficial fiscal policy co-ordination is likely to be. Finally, the Maastricht Treaty is very vague about who should take care of financial stability within the Union. In the past, national central banks used to care of both monetary and financial stability. The “dismantling” of the latter and the failure to assign the relevant functions to the ECB or any other agency has given rise to a situation where national central banks are likely to carry over banking policy from a local perspective when a union-wide approach is required. Decentralisation of banking policy prevents the exploitation of economies of scale in the provision of the public good of financial stability; impedes the pooling of risks, when different regions/nations are exposed to imperfectly correlated shocks; and is subject to negative spillovers that are increasing in the degree of economic and monetary integration. Moreover, decentralisation is likely to favour information asymmetries between NCBs and the ECB, seriously impeding the co-ordination of any rescue operation by the latter and negatively affecting also the conduct of monetary policy. The paper argues in favour of partial centralisation of the banking policy. Among other prescriptions, we stress the importance of establishing a two-tier monitoring system for the arising of financial distress, where NCBs and ECB share at least part of the relevant information on each country financial institutions. 

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Working Paper No. II/24

Joachim H. Spangenberg, Ines Omann, Friedrich Hinterberger 
(Wuppertal Institute for Climate, Environment, Energy Ltd) 

Sustainability, growth and employment in an alternative European economic policy. Theory, policy and scenarios for employment and the environment  
 

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Working Paper No. II/25

Wladimir Andreff  
(University Paris 1 Panthéon Sorbonne) 

The Prospect of the European Union Enlargement to the East for Employment  
 

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Working Group III

 

Working paper No. III/1

Liêm Hoang-Ngoc 
(SET-METIS, Université Paris I) 

Full Employment and Working Time Reduction - Some Lessons from the French Debate on Employment Policy 

Abstract 
The paper deals with the reduction of working time with particular reference to the most recent discussions and developments in France, particularly the "Loi Robien" and the legislation of the Jospin government. After the introductory section 1 the following section 2 analyses different forms of working time reductions, from individual part-time to collective conventions with wage compensation, emphasising that working time reductions are generally accompanied by work-reorganisation measures (2RT). Depending on the modalities the macroeconomic effects of working time reductions are quite different. Section 3 discusses the preconditions which must be fulfilled in order to make working time reduction employment effective. The reduction of working time has to be considerable and the accompanying government subsidies meant to compensate the wage shock must be differentiated according to the different economic situations of firms. In any case the development of the French case and of the management and consequences of the working time reductions to come need careful observation and further research. 

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Working paper No. III/2

Erwin Weissel 
(Dpt. of Economics, University of Vienna) 

Austria’s Long Road to Tripartite Bargaining - The Role of Preconditions, Chance and Intent 

Abstract 
The member states of the EU have been manifestly reluctant to create a common Social Policy, a set of uniform regulation that shape industrial or labour relations, in spite of the fact that they share the goals of an appropriate social order as expressed in treaties or decisions. One of the reasons seems to be a strong preference for "institutional competition" in line with the fundamental (neo)liberal ideology. Starting from this search for best practice the rather successful Austrian model of extreme neo-corporatism might provide at least some elements of a common social policy (e.g. the "social dialogue") that is not thrust upon the members via commission and council, but pieced together by sovereign states within their autonomy, leaving room for appropriate modifications. As the analysis shows, however, the Austrian variety of tripartite bargaining owes its existence to an unique combination of more or less historical chance events and actions of interest groups that created institutions compatible with each other tough not designed to yield a coherent total system, all in long, drawn-out process of learning and discovery. Evidently all this cannot be replicated at an European scale and it is rather doubtful whether any EU-initiative will be able to put elements of the Austrian social consensus into their proper place, lacking the experience and, above all, the conviction that what looks like a zero-sum-game (or prisoners dilemma) can be converted into a positive-sum-game. Thus there is no "big-bang"-solution for the EU and no simple application of rules of the game that have proven their value in a specific context. 

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Working Paper III/3

Erwin Weissel 
(Dpt. of Economics, University of Vienna) 

Employment Policy in a Microeconomic Perspective. The Erosion of the Classical Employment Contract 

Abstract 
The employment contract, an exchange of labour power for a wage, has been invented at least some 3000 years ago. Over the centuries, it was modified, without altering the fundamental rights and duties of the parties concerned, who profit from this relation. It served its purpose well right up to the Fordist system of production, because it corresponded to the organizational design of the capitalist firm. It became classical because of its wide use and it became dominant because nobody questioned its rationale. Even the socialist parties accepted it after their first, revolutionary phase. However, about two decades ago neo-institutionalism, transaction cost economics and agency-theory initiated a scientific search for alternatives, while in practice sophisticated management experimented with contractual designs that altered the fundamental characteristics. These reactions, both theoretical and practical, to a profoundly changed political, social and economic scenario have produced, among other problems, the threat of sustained high unemployment resulting from behavioral patterns and legal settings that have so far not adapted themselves to the new situation. Reviewing what is proposed to cope with this problem, it is argued that the traditional approaches to employment policy, developed in a Fordist-Keynesian World, are insufficient because of a totally different character of the labour market, both on the demand and on the supply side. 

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Working Paper III/4

Jonathan Michie 
(Birkbeck College, University of North London) 

Labour Flexibility and Innovative Investment 

Abstract 
Using evidence from the 1990 Workplace Industrial Relations Survey in Britain (WIRS), this paper investigates the relationship between firm's human resource management practices on the one hand, and their 'innovative' activities on the other. Our results suggest that policies aimed at increasing new labour market 'Flexibility' actually have a significantly negative effect on the probability of firms engaging in R&D and introducing new technology. We also find that firms that used more innovative work practices were more likely to engage in R&D and to introduce technical change. 

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Working Paper III/5

Alfred Kleinknecht, Remco Oostendorp, Menno Pradhan 
(Dpt. of Economics, Delft University of Technology) 

Flexible labour, firm growth and employment An exploration of micro data in the Netherlands 

Abstract 
While flexible labour relations have gained in importance in recent years, little is known about their effects on firm performance. Investigating the impact of various types of flexible labour relations on firm growth and employment in a large sample of firms in the Netherlands, we find that firms that experience greater internal flexibility among their labour force generally perform better in terms of sales and job growth. Various types of increased external flexibility, however, have hardly any positive impact on sales and, in some cases, a negative impact on labour productivity. One exception is the amount of manpower hired from private employment agencies, the impact of which differs between innovating and non-innovating firms. We argue that the benefits of increased external flexibility of labour tend to be off-set by a negative impact on the formation of social and human capital. 

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Working Paper III/6

John Grahl 
(Business School, University of North London) 
Notes on Recent Work by the Regulation School 

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Working paper No. III/7

Alfred Kleinknecht 
 (Dpt. of Economics, Delft University of Technology) 

Effective demand and technological innovation A note on why Keynes was more right than he thought 

Abstract 
Analysing changes over time in firm-level R&D efforts we find that demand growth has a positive influence on changes in a firm's R&D effort, confirming Schmookler's (1969) 'demand-pull' hypothesis. This finding points to an aspect of effective demand that has never been noticed by Keynes or the Keynesians. The finding reported here on R&D adds to recent studies that confirm the 'demand-pull' hypothesis using different innovation indicators, models and databases. Independent confirmation of this hypothesis is important because of evidence in the literature that a firm's innovation activities are positively related to employment growth, export intensity and profits. This may be an extra argument of why effects on aggregate demand should be considered when judging about the desirability of certain government policy measures. 

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Working paper No. III/8

Liêm Hoang-Ngoc 
(SET-METIS, Université Paris I) 
 
 Les politiques actives de l'emploi en France: Objectifs, résultats, perspectives 

Abstract 
Ce rapport établit une typologie des objectifs et des instruments de la politique active de l’emploi en France. Celle-ci s’est progressivement orientée au cours des années 1990 vers la mise en œuvre de mesures d’ordre général d’abaissement du coût du travail. Une synthèse des travaux évaluant l’efficacité de ces politiques est proposée. Deux pistes, la réforme des cotisations patronales et la réduction de la durée collective du travail, explorées plus récemment par les politiques publiques, sont enfin mises en perspectives. 

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Working paper No. III/9

Jonathan Michie*, Maura Sheehan** 
(*Birkbeck College, **Queen University Belfast) 
 
No Innovation without Representation? An Analysis of Participation, Representation, R&D and Innovation 

Abstract 
The paper investigates the role of worker participation and representation in corporate performance. We use the UK’s 1990 Workplace and Industrial Relations Survey to investigate the relationship between firms' human resource management practices - particularly employee participation and representation - on the one hand and firms’ levels of research and development (R&D) expenditure and the probability of their introducing innovative investment on the other. We bundle various types of participatory and representative practices, along with other human resource management techniques. We examine not only employee participation and representation mechanisms, including contingent pay schemes, but we also include an analysis of the relation between these practices on the one hand and on the other, firstly, flexible job assignment and secondly, the relation to the firm’s innovative activity. The paper also examines the relation between clusters or systems of such ‘complementary’ participatory practices and innovation. Our results indicate that the use of participatory practices is positively correlated with the probability of ‘innovating’. While it is widely recognised that ‘flexible’ employees are important for firms’ competitiveness, such practices, if not complemented with adequate reward systems and increased training, can result simply in an increased intensification of work. 

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Working paper No. III/10

Erwin Weissel 
(Dpt. of Economics, University of Vienna) 
 
Employment through Working-Time Policy, A Neo-Capitalist Test Approach 

Abstract 
High unemployment, above the level that can be considered" “natural” (for whatever reason), poses a problem for economic as well as social policy, although their objectives diverge, the former striving for an efficient use of all available resources while the latter aims at a just distribution. The result is a well-known and extensively analysed conflict arising from the fact that there is a trade-off, that more justice can only be had for the price of less efficiency, and more efficiency entails less justice. Since policy programs depend on political acceptance if they should have a chance to be implemented, both sides have watered down the rigid application of their principles, yielding an uneasy compromise of interventions in the labour market. Even M. Friedman, who forcefully argued that capitalist justice requires that everybody´s share in total product should equal his contribution to it, violates it by the introduction of his famous (and controversial) negative income tax. The radical alternative presented for discussion, and not yet for implementation, is to create institutions that would constitute a “pure” model of the labour market. If it can be shown to work satisfactorily, so much the better. In the contrary case, it is argued that the whole idea of determining employment via a labour market, however regulated or deregulated, should be discarded. 

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Working paper No. III/11

Liêm Hoang-Ngoc 
(Set-Metis, Université Paris I) 
 
La réduction de la durée collective du travail comme instrument de politique de l'emploi en France 

Abstract 
The french governement has recently experienced the way of the reduction of the collective working time as an instrument of active employment policy. The theoretical scheme of the Reduction-Reorganisation of the Working Time (Réduction-Réorganisation du Temps de Travail ; 2RT), proposed by Dominique Taddéi, is explicitely the refernce of the loi d’orientation et d’incitation of the french government. The macroeconomic simulations, which have been realized by the Ministry of Labour and the Ministry of Finance to prepare the law are presented. They both conclude  for an great impact on employement under specific hypothesis. The effect of the measure depends mainly on the capacity of actors to conclude  some collective agreements on this topic at the decentralised level. It’s why the governement has proposed some financial incitation to stimulate the négotiation at the plant level before a second law which will fix the definitive conditions for the reduction of working time at 35 hours per week. The results and the content of the first set of negotation are summarized. 
 
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Working paper No. III/12

Jörgen Pedersen 
(Technical University of Denmark) 
 
Economic Growth and its Regional Distribution. Harmonization and Unequal Development in Euroland 
 
Abstract 
There are two questions raised in the paper: 1)consequences of the EMU on economic growth in Euroland, 2)regional distributional economic effects from EMU. Arguments in respect of the first question depend very much from less uncertainty from changes in rates of exchange and higher degrees of flexibilities in labour markets versus the sensibility of different regions in respect of asymmetric shocks to the economic life which cannot be expected to be compensated from the positive effects of the EMU. Arguments in respect of the second question are first of all depending on the chain between increasing returns to scale and technology in production of new technology and application of new technology on one side and localized learning returns on the other side. A priori it can be expected that more EU influences in these matters will give arguments for allocation of resources to already existing scientific and technological centers. 

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Working paper No. III/13

Giulio Cainelli*, Roberto Fabbri** and Paolo Pini*** 
(*IDSE-CNR, Milano, **University of Ferrera and ***University of Ferrera, University of Bologna) 
 
Performance-Related Pay or Pay for Participation? Forms of Agreement and Determinants: Evidence from Companies in Emilia-Romagna  

Abstract 
Since the July 1993 agreement, the adoption of company agreements based on a link between compensation and company performance has spread, becoming quite significant a presence even at the local level, without, however, involving companies overall where collective bargaining takes place. Consequently, studies of bonuses have recently been addressed to the examination of this phenomenon also for firms located in specific geographical areas, not just with reference to a sample of them, in general of medium-large size, at the national level. In this study, company bargaining on performance-related pay [PRP] and/or pay for participation [PFP] is examined in the years 1994-1997 in Emilia-Romagna. First of all, forms of agreement on PRP/PFP are analysed to find out the incentive, risk-sharing and participation mechanisms suggested by economic theory and embodied within each contract. Secondly, an econometric analysis is carried out on the factors behind the introduction of PRP/PFP, and of the various forms it takes in practice. 

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Working paper No. III/14

Erwin Weissel 
(Dpt. of Economics, University of Vienna) 
 
Employment through Working-Time Policy, A Neo-Capitalist Test Approach (Revised, expanded version) 

Abstract 
High unemployment, above the level that can be considered" “natural” (for whatever reason), poses a problem for economic as well as social policy, although their objectives diverge, the former striving for an efficient use of all available resources while the latter aims at a just distribution. The result is a well-known and extensively analysed conflict arising from the fact that there is a trade-off, that more justice can only be had for the price of less efficiency, and more efficiency entails less justice. Since policy programs depend on political acceptance if they should have a chance to be implemented, both sides have watered down the rigid application of their principles, yielding an uneasy compromise of interventions in the labour market. Even M. Friedman, who forcefully argued that capitalist justice requires that everybody´s share in total product should equal his contribution to it, violates it by the introduction of his famous (and controversial) negative income tax. The radical alternative presented for discussion, and not yet for implementation, is to create institutions that would constitute a “pure” model of the labour market, increasing the speed of its throughput irrespective of the level of unemployment, and equalizing the spells (probabilities) of unemployment across the different types of workers.  If it can be shown to work satisfactorily, so much the better. In the contrary case, it is argued that the whole idea of determining employment via a labour market, however regulated or deregulated, should be discarded. 

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Working paper No. III/15

Michel Husson 
(Institut de recherches économiques et sociales) 
 
Employment Performances in Europe: The Conditions of Success    
 

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Working Group IV

 

Working paper No. IV/1

Alfred Kleinknecht 
 (Dpt. of Economics, Delft University of Technology) 

Is Wage Restraint harmful to Innovation? - Critical Notes on the Dutch Employment Miracle 

Abstract 
In a neo-classical framework one can argue that unemployment can be reduced by restraining wages increases and by means of downward wage flexibility. The experience of The Netherlands shows that this can be advantageous for short-run job growth. I argue, however, that restrained wage increases are detrimental from a Schumpeterian perspective since the discourage product and process innovation. Lesser innovation efforts will in turn weaken the supply-side strength of an economy. In the long run, such a strategy can cost jobs, rather than creating jobs. The paper explores implications of Schumpeter’s notion of creative destruction and of Schmookler’s hypothesis of demand-pulled innovations, borrowing from recent empirical innovation research as well as from practical experiences with the Dutch "Polder" model. 

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Working paper No. IV/2

Jörgen Lindgaard Pedersen & Annegreth Hansen 
(Dpt. of Technology and Social Sciences, Technical University of Denmark) 

The Politicisation of Technology: Policy between Big Business and Public Movements 

Abstract 
New biotechnology development, including genetic engineering, has been object of R&D and technology policy in most industrialised countries from the late 1970s and the beginning of the eighties. Policies which have reflected an optimistic science push conception of technological development and a conception of biotechnology as an important international competitive factor for industry. The policy has in addition to al large extent also reflected a linear conception of technological development among policy makers. During the same period and also before, state and international regulation has been on the political agenda. A regulation which has more foremost been concerned with environmental risks and with health risks, but also, though to a lesser extent, with environmental, health and nutritional consequences. The balance of these two has been, as also advanced by Schumpeter, been recognised as being important for consensual development of the capitalist society. Not that there has been consensus on the level of regulation, but the necessity of regulation has been rather widely recognised. The Danish development of new biotechnology, seems to be an exemplary story of this development. Through the analyses of a) Danish R&D and technology policy within the area of new biotechnology, b) Danish regulation of biotechnology, and c) public debate on new biotechnology and its regulation, the story, so far, of the development of biotechnology will be told, emphasising the role of regulation and public debate on economic uncertainty and on the rate of direction of new biotechnology development. The story in many ways demonstrate an exemplary consensual or negotiated development of new biotechnology if focus is on the marketed products - though not a development free of conflicts. The story, however, also reveals that if non-marketed new biotechnology products are included in the analysis, the introduced regulation is not enough to ensure acceptance of new biotechnology based products. State regulation of industry, especially within agricultural and food technology, has not been able to obtain general public acceptance of the application of genetic engineering. Though the lack of acceptance could be ascribed to distrust in the state’s independence of industry and to non-restrictive regulation, both industry and the critical public to a large extent agree that resistance seems to be based on a broader and rather complex conception of the consequences of the technology as well as lack of unambiguous benefits of the technology. A circumstance which means that regulation is not just redistribution among well defined groups, but cut across many of the "standard interests". 
 



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Last Rev.: 18th January 2000