The European Employment Problem

How do we explain the poor employment performance in Western Europe since about the mid-1970s? This question is in fact twofold: what initiated the dramatic rise in unemployment, and what mechanisms have made it continue for so long? My attempts to answer these questions form the basis for a discussion of various policy options. A main point of the paper is the complex interaction, often in the form of complementarities, between different explanatory factors behind the West European employment problem.<p> Unfortunately, this complexity makes it difficult to test and estimate attempted explanations. Moreover, the complementarities between different factors often preclude any positive effects of isolated policy actions on the employment situation; a battery of policy actions seems necessary.