Labor Market Flexibility, Rigidity and Unemployment : An Index Approach to Cross-country Comparisons & An Essential Review of the Evidence

Abstract: Unemployment is rising quite dramatically almost everywhere of the world. Undoubtedly, it is a very debating and heart touching issue of the present times to the policymakers. The recent past introduction of labor market rigidities and inflexibilities in the late 1980s, that play a significant role on unemployment is a very common world’s debating topic across Europe. It is blamed that rigid labor market institutions and generous social policies are the root causes behind European unemployment, although there is an intense debate going on regarding this issue and still much room to know about it. So, the Europeans should come forward to explore their ‘bleak’ unemployment problem for the prosperity of their future. However, there are so many causes behind the rise of unemployment in Europe. Not a single specific reason is accused for increasing European unemployment. However, the key aim of this paper is to find out the possible causes behind European unemployment particularly from the year 1970 to 2007 and, how both globalization and technological changes are affecting the European labor market on unemployment.