From Bismarck to Maastricht: The March to European Union and the Labor CompactThis paper considers the likely impact that European Union (EU) will have on the labor compact. It is argued that, despite increased economic integration in Europe, countries will still be able to maintain distinct labor practices if they are willing to bear the cost of those practices. The incidence of many social protections probably already falls on workers. In addition, it is argued that imperfect mobility of capital, labor, goods and services will limit the pressure that integration will place on the labor compact. Evidence is presented suggesting that labor mobility among EU countries has not increased after the elimination of remaining restrictions on intra-EU labor mobility in 1993. Moreover, immigration from non-EU countries, which is much larger than intra-EU migration, has declined since 1993. Evidence is also reviewed suggesting that the demand for social protection rises when countries are more open, and therefore subject to more severe external shocks. This finding suggests that increased economic integration and European Monetary Union could lead to greater demand for social protection. The U.S. experience with state workers' compensation insurance programs is offered as an example of enduring differences in labor market protections in highly integrated regional economies with a common currency. |
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1050 Massachusetts Avenue Andrei Shleifer back cover benefit generosity BISMARCK TO MAASTRICHT Bureau of Economic Calmfors 1998a capital common currency compensation insurance Dani Rodrik demand for social despite destination countries economic integration economists employers Europe European Monetary Union European Parliament European Union Evidence Exchange Rate flows Free searchable abstracts full subscription Germany impact industry inside the back instructions inside Joshua Angrist LABOR COMPACT Alan labor market programs labor market reforms labor mobility labor programs labor protections labor standards Maastricht Treaty Macroeconomics MARCH TO EUROPEAN migration rates monetary policy National Bureau NBER Working Paper non-EU countries Number Author(s OECD Partial Subscription percent policy makers political politician pressure on labor price convergence product market restrictions protection and openness protective labor legislation restrictions on labor Rodrik single area social insurance social protection social welfare structural unemployment suspect unemployment compensation weaken workers www.nber.org Free searchable Yin-Wong Cheung Menzie