Working Paper No. 500

Anatomy of Policy Complementarities

Published: June 23, 1998Pages: 54Keywords: Unemployment, Complementarities, Political Economy, Employment Policy, Unemployment Benefits, Taxation, InequalityJEL-codes: E61, E62, H21, H23, H53, H55; H61, I30, J64, J68

Anatomy of Policy Complementarities Mike Orszag and Dennis J. Snower


The analysis provides a new explanation for two widespread problems concerning European unemployment policy: the disappointingly small effect of many past reform measures on employment, and the political difficulties in implementing more extensive reform programs. We argue that the heart of the difficulty may be the failure of many European governments to implement broad-based reform strategies. Our analysis suggests that major unemployment policies are characterized by economic complementarities (in that the ability to gain political consent for one policy depends on the acceptance of other policies). Under these circumstances, incremental, small-scale adjustments of existing policy packages are doomed to failure. Our analysis suggests, instead, that the European unemployment problem should be tackled through "broad" reforms that manage to exploit the salient economic and political complementarities among individual policy measures.

Interdisciplinary European Studies

The European Union in a Changing World Order

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This book explores how the European Union responds to the ongoing challenges to the liberal international order. These challenges arise both within the EU itself and beyond its borders, and put into question the values of free trade and liberal democracy. 

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