LSE LSE Research Laboratory LSE
LSE Research Laboratory (RLAB)

Abstract for:

Unemployment in Britain: A European Success Story

Christopher A.  Pissarides,  December 2003
Paper No' CEPDP0600: | Full paper (pdf)
Save Reference as: BibTeX BibTeX File | Endote EndNote Import File
Keywords: unemployment in UK; monetary policy, Beveridge curve, Phillips curve

JEL Classification: E5; J5; J64

Is hard copy/paper copy available? YES - Paper Copy Still In Print.
This Paper is published under the following series: CEP Discussion Papers
Share this page: Google Bookmarks Google Bookmarks | Facebook Facebook | Twitter Twitter

Abstract:

Unemployment in Britain has fallen from high European-style levels to US levels. I argue that the key reasons are first the reform of monetary policy, in 1993 with the adoption of inflation targeting and in 1997 with the establishment of the independent Monetary Policy Committee, and second the decline of trade union power. I interpret the reform of monetary policy as an institutional change that reduced inflationary expectations in the face of falling unemployment. The decline of trade union power contributed to the control of wage inflation. The major continental economies failed to match UK performance because of institutional rigidities, despite low inflation expectations.