That said, employment protection shifts the burden of unemployment from the average worker onto those who are “bad risks” from an employer’s POV, in exactly the same way as making it hard for landlords to evict bad tenants ensures that homelessness is confined to the most marginalised (who are likely to be the worst risks from a landlord’s POV). Neither is a good thing if you’re worried about “social exclusion”.

I agree with Tim – to speak of “Europe” in this context is to conflate very different labour market institutions and outcomes. Some countries have lower unemployment than the US, some much higher. And the point of this paper is that those outcomes seem only weakly correlated, at best, with the institutions.

As an aside, when the 1994 OECD Jobs Study came out its studied ignoring of fairly obvious points such as high unemployment leading to high benefits rates (rather than the reverse), along with its adoption of arbitrary lags with no prior theoretical justification to try and make the econometrics fit, led me to dismiss it as an ideological hatchet job at the time.

This is different than the question of the relationship between unemployment benefits and level of unemployment.

Am I wrong about this? I haven’t kept up with the recent literature.

Tim – you are absolutely right on the different models etc – but my target here was less the European welfare state as it actually exists than as it is represented in US debate. It should be noted perhaps in passing that many US lefties who like the ‘European model’ aren’t much more sophisticated than right wing critics in making these important distinctions.

Grand claims like “welfare state is a very bad thing” is not what you get in oecd reports. The last oecd employment outlook :

http://www.oecd.org/document/12/0,3343,en_2649_37457_38792716_1_1_1_37457,00.html

explains that offshoring increases workers’vulnerability, that governments must “do more”, finance welfare with income or VA taxes rather than payroll taxes, and praises high-taxed denmark. OK, it is a bit Econ 101, you may agree with it or not, but it is mostly plausible policies based on plausible stories and facts, not ideologically-based grand claims about the necessity to dismantle the Very Bad European Welfare State.
From a european point of view, this kind of discussion is a bit strange. Unemployment is not a very hot subject in US academic economics, because it is not really a problem in the country; it has been replaced by income inequality and poverty (it seems that as soon as an economic problem is nt an american problem, it is not an economic problem any more). I think it has created a general ignorance (there are, of course, exceptions) about the subject, so that if you ask an american economist about unemployment in Europe, he will answer quickly “ho, probably the cost of the welfare state” an answer which means in fact “I have no idea”.
But if you go out of american economics and look at papers and people who really study the subject, you find a big amount of studies, showing that (surprise!) the subject is hard, but incentive-based economics works quite well.

Yes that’s one possibility but 1) it just doesn’t jive with intuition and casual observation, 2) once you control for the difference in counting, the difference in rates could go other way, particularly since in US unemployment benefits are more closely tied to actively looking for a job (ie. being unemployed as opposed to not in labor force) and 3) the authors basically just speculate that this could be the case with little to back it up. At least as far as I’ve gotten into the paper (about a half way)