Evaluating the Longer-Term of an Employment Strategy. Ministry of Labour 2007
Abstract. The aim of this note is to contribute to the theoretical and empirical basis of an employment strategy based on a quantitative approach. The strategy is based on three pillars. Firstly, the goals of the strategy have to be clearly specified and their mutual consistency secured; secondly, there have to be suitable labour market institutions; and thirdly, the set of actual policy tools has to work in such a way that, in combination with the working of the proper institutions, it meets the long-run goals of the strategy. Accordingly, the paper first reviews the trade-offs between the goals of the employment strategy and then, on the basis of recent labour economics literature, discusses the basic impacts of labour market institutions and policy tools. Next, we illustrate quantitatively the choices of employment policies based on the econometric work carried out at the OECD. The paper ends with an evaluation of the key current challenge, globalisation, on the employment strategy using simulations of an aggregative labour market model.