اروپا در مقابل امریکا: انعطافناپذیری سازمانی در مدل ساده هنجاری

We show how the differences in US and European institutions can arise in a normative model. The paper focuses on the labor market and the government's decision to set unemployment benefits in response to an unemployment shock. The government balances insurance considerations with the tax burden of benefits and the possibility that they introduce adverse “incentive effects” whereby benefits increase unemployment. It is found that when an adverse shock occurs, benefits should be increased most when the adverse incentive effects of benefits are largest. Adjustment costs of changing benefits introduce hysteresis and can help explain why post-oil shock benefits remained high in Europe but not in the US. Desirable features of the model are that we obtain an asymmetry out of a symmetric environment and that the mechanism yielding hysteresis is both simple (requires the third derivative of the utility function to be non-negative) and self-correcting. Empirical evidence concerning the role of corporatism is discussed.

A distinguished tradition in economics has tried to explain the differences in economic organization across Europe and America. The different historical circumstances, ranging from immigration to the role of the frontier, have been used to construct a variety of positive theories of economic systems. One example of this literature concerns itself with the contrasting labor market performance of the US and Europe, particularly after the oil shocks of the 1970s. In brief, unemployment rates went up in both places, but only came down in the US. Persistently high unemployment rates in Europe, or ‘Eurosclerosis’, during the 1980–90s combined with many governments' reluctance to undertake reforms, led observers to blame ‘inflexible’ labor market institutions that were not being set to raise public welfare. Instead they were often viewed as being determined by a political economy process designed to protect the interests of one group over another. A typical example of a politically influential group is the employed majority of voters. They may gain from inflexible institutions that protect their own jobs and be unwilling to fund investments in resources to help get an underclass of long-term unemployed back to work. 1 Although capable of explaining why reforms may be blocked, this explanation on its own also predicts that the US should have experienced similar problems to Europe. Another strand of research has instead argued that the median European voter has different preferences to their US counterpart making her particularly willing to help the poor and unemployed

When economists study labor market outcomes, the dynamics of institutions present in their models are typically left unexplained. Consider, for example, the time path of unemployment benefits. Figs. 1A and 1B show how they increased sharply in the United States and Spain in the years immediately after 1973 and 1979. A similar pattern is present in the data for many other OECD countries. If we are worried about the unemployment rate and believe institutions are exogenous, we must also believe that these countries were incredibly unlucky. Just when they got hit by an oil shock, politicians decided to increase benefits, worsening their unemployment problems. Only the US turned out to be lucky in the 1980's when benefits returned to their pre-shock levels. A less ad-hoc story involves developing a theory where institutions are rational. In such a theory, unemployment benefits can certainly increase the unemployment rate, but it should also allow us to understand what drives movements in benefits. This is the objective of our paper.