European Social Models from Crisis to Crisis: Employment and Inequality in an Era of Monetary Integration

From the deep Europe-wide recession, triggered by the end of Germany’s post-unification boom through the Great Recession following the late-2000s financial meltdown, with monetary union's establishment in between, Europe’s social models have evolved in a tumultuous macroeconomic environment. Europeans use 'social models' to refer to the combination of welfare state, industrial relations, and educational institutions jointly structuring the supply-side of the labor market. This book addresses the controversies over the social models' effects on employment and distributive outcomes. The dominant view in those controversies has been that in the name of equity they have impaired the labor market's efficiency, thereby causing unemployment. But doubt is cast on this supply-side-only diagnosis by the powerful macroeconomic forces unleashed by developments following German unification and Europe's embarkation on monetary union. Our analysis of the interaction of those forces with Europe's diverse social models points toward two conclusions.  First, the impact of those forces far outweighs the social models' employment and distributive effects, especially in the Eurozone, where its truncated structure of economic governance transformed the Great Recession into a sovereign debt crisis that threatened the Euro's survival and inflicted enormous social costs.  The other is that there is no inevitable trade-off between higher employment and lower inequality, so that the employment effects of counteracting markets’ tendency to generate inequality depends on the macroeconomic conditions under which it is done and how it is done. We propose a panel of experts to assess the support for these conclusions provided by the book.