Policy Article

The "Dutch Model": A Patent Recipe for Full Employment? (original publication in German)

Die Weltwirtschaft, 2000 (1): 89-116

In the early eighties the Netherlands experienced a severe economic crisis with a pronounced rise of the unemployment rate. Not even two decades later the Dutch economy has recovered from the ‘Dutch Disease’ and has to show a booming labour market instead. The analysis focuses on the question to what extent the government´s labour market programs contributed to the remarkable decline of unemployment and if further determinants could help to explain the positive labour market development. The analysis reveals that in the Netherlands a significant share of unemployment is hidden in labour market or social security programs thus glossing over the actual size of unemployment. The unemployment rate rises significantly when it is broadened by the unemployment reducing effects of the various programs. In view of rising scarcities on the labour markets in the mid nineties the Dutch labour market policy took a turn to promote the reintegration of unemployed into the regular labour market by numerous but mainly experimental programs which still have to prove its effectiveness. A better explanation of the Dutch employment miracle seems to give the 1982 „Wassenaar-Agreement“ between employers´ associations and trade unions. They agreed upon a more productivity related wage finding process and a higher degree of labour market flexibility while the government simultaneously decreased its interventions in labour market affairs.

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