The Unassuming Economist

Thirty years ago, a distinguished group of economists advocated a ‘two-handed’ approach to unemployment that targeted supply as much as demand. This column examines recent work on the effectiveness of cyclical and structural policies – the two ‘hands’ – targeting unemployment in Europe. It further considers the pressures from greater integration of capital and labour markets on the success of these reforms. Cyclical measures, particularly the easing of monetary policy, have been successful, but further structural reforms are still needed in many countries where average unemployment remains too high.

Read the rest at Vox.

Figure 1. Actual and predicted changes in unemployment, advanced economies, 2010 to 2015

Notes: The chart compares the actual change in unemployment in each country with what could have been predicted on the basis of the hisotrical relationship between unemployment and output (Okun’s Law).