We evaluate the effects of outsourcing and wage solidarity on wage formation andequilibrium unemployment in a …

taxation. In addition, the appearance of equilibrium unemployment also provides an incentive for the government to directly tax …

this unforeseen increase in unemployment. We then discuss the role of labour market institutions in the adjustment process … that has brought unemployment back to normal' levels. We argue that these institutions cannot be blamed for the increase in … unemployment, but that more flexible institutions could have lead to a more rapid decline in unemployment. …