Reforming the Liberal Welfare State: International Shocks, Unemployment and Household Income Shares

Hassan Molana, Catia Montagna, George E. Onwordi

Research output: Working paperDiscussion paper

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We examine how labour market and welfare state reforms affect long-run unemployment and the dynamic behaviour of an economy characterised by a liberal welfare state system in response to international shocks. The shares of different income sources in household income shed light on the distributional impact of policy reforms and shocks. Reform packages exist that can improve upon the labour market outcomes of a liberal welfare state system. Even when reducing labour market flexibility and steady-state unemployment, flexicurity reforms appear to lead to a higher volatility in unemployment and GDP in response to exogenous foreign shocks; training expenditure, by improving firms’ productivity, can however reduce these effects.
Original languageEnglish
PublisherUniversity of Aberdeen: Business School
Number of pages41
Publication statusPublished - May 2017

Publication series

NameDiscussion Paper in Economics
PublisherUniversity of Aberdeen
ISSN (Electronic)0143-4543

Bibliographical note

We would like to thank Suresh Chand Aggarwal, Deb Kusum Das, Wendy Li and participants at the IARIW 34th General Conference, Dresden, Gaaitzen de Vries, Marcel Timmer and seminar participants at Groningen, Holger Görg, Fredrik Sjöholm, and John Skåtun for useful comments and suggestions. This work was supported by the NORFACE ERA-NET (New Opportunities for Research Funding
Agency Co-operation in Europe Network) Welfare State Futures Programme, Grant Number 462-14-120. The usual disclaimer applies.


  • welfare state reforms
  • flexicurity
  • unemployment


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