Some social consequences of the financial crisis in europe and comparisons with the us
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Some social consequences of the financial crisis in Europe and comparisons with the US. Etienne Wasmer, Sciences-Po, OFCE, CEPR and IZA. Monday, April 20 at 4pm - Buffett Center Conference Rm , Northwestern University. Initial title/subject. Is America becoming France?

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Some social consequences of the financial crisis in europe and comparisons with the us

Some social consequences of the financial crisis in Europe and comparisons with the US

Etienne Wasmer,

Sciences-Po, OFCE, CEPR and IZA

Monday, April 20 at 4pm - Buffett Center Conference Rm, Northwestern University.


Initial title subject

Initial title/subject

  • Is America becoming France?

  • For an economist, social perceptions difficult to apprehend.

    • If no data, no reality?

    • At least, more difficult to « falsify » arguments and theories.

    • How to deal with that?


Dimension 1 lobbying

Dimension 1: lobbying


Dimension 2 trust in govt

Dimension 2: trust (in govt.)


3 labor markets and the manufacturing industry

#3: labor markets and the manufacturing industry


Outline of the talk

Outline of the talk

  • Start with description of the French labor market, political implications.

  • Trust in institutions to deal with it.

  • Structural problems: the adaptability of labor markets and lobbying.


A unemployed b c under employment

A: # unemployedB&C: # under-employment


Dual labor market view

Dual labor market view?

  • Male 25-49 traditionnally protected, employment rate higher than in the US.

  • Outsiders: lower skill women, youth, minority.

  • Now, the « core » is affected by the recession.


Surge in layoffs

Surge in layoffs!


Some social consequences of the financial crisis in europe and comparisons with the us

  • New type of recession, affecting the core of protected employed workers.

  • Political tensions to foresee!

    • Males below 25 are the ones to watch!


Yesterday

Yesterday


Europe and the world ocde forecasts march 2009

Europe and the world: OCDE forecasts, March 2009


America becomes france labor markets converge

America becomes France: labor markets converge!

  • What about 2: trust issues?

  • Work by Yann Algan (Sciences-Po) and Pierre Cahuc (Ecole Polytechnique)

    • La société de défiance


Some social consequences of the financial crisis in europe and comparisons with the us

« Generally speaking, would you say that most people can be trusted or that you can’t be too careful in dealing with people»

WVS 1990, 2000


Some social consequences of the financial crisis in europe and comparisons with the us

« No confidence in the justice system ? »


Some social consequences of the financial crisis in europe and comparisons with the us

« No confidence in Parliament… »

NB: Harris Poll 2009

9% have « a great deal of confidence » in the Congress


Convergence again

Convergence again?

  • What about confidence in the ability to manage the current situation?


That was in april 2008

That was in April 2008

In March 2009: Harris poll: 36% have a great deal of confidence in the White House.

  • In this year’s survey the leaders of six institutions enjoy the most confidence:

    The military (58% have a great deal of confidence);

    Small business (48%);

    Major educational institutions (40%);

    The White House (36%);

    Medicine (34%);

    Organized religion (30%);

  • Leaders of the following institution engender the lowest levels of confidence:

    Wall Street (only 4% have a great deal of confidence);

    The Congress (9%);

    Law firms (11%);

    Major Companies (11%);

    The press (12%);


In terms of trust

In terms of trust

  • France-US divide in terms of trust in major institutions.


Last point

Last point

  • Adaptability of the labor market.

    • Based on Wasmer and von Weizsäcker

      • « A Better Globalization Fund », Bruegel Policy Brief, Jan. 2007

        • European new fund to cope with Globalization, adapted from US Trade Adjustment Assistance created by Kennedy Administration in 1960’s.


Idea behind glob fund

Idea behind Glob. Fund

  • Some workers hurt by trade policy of EU

    • Left hand would repair what right hand did

  • Limited funding and activation schemes (mobility, training)

  • Different from original TAA (passive policies, income support)


The costs of job displacement in the eu and the us

The Costs of Job Displacement in the EU and the US

Source: Kletzer (2001), OECD (2005) and authors’ calculations. (*) The re-employment rates are not directly comparable: the US data is based on retrospective questions, while EU data is based on a panel and thus follows more accurately a cohort of displaced workers.


Accumulation of sector job specific skills

Accumulation of sector/job specific skills


Dots sectors

Dots = sectors


Theory

Theory

  • Employment protection and « labor market frictions » raise the incentives to invest in specific skills.

    • In turn: higher demand for employment protection, in order to protect specific skills.

  • Good characterization of EU-US differences

    • Hall, P.A.; Soskice, D. (2001): An Introduction to Varieties of Capitalism. In: Hall, P.A.; Soskice, D. (eds.):

    • Wasmer, E. American Economic Review, June 2006.


Conclusion

Conclusion

  • Is America becoming France?

    • Not yet there!

  • But surely, political tensions.

    • Might resorb in 2010.

    • But implies a likely slow down of structural reforms (if possible!)


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