Labour Supply Curves for EU Member and Candidate States: An applied general equilibrium analysis. Factor Markets Working Paper No. 26, June 2012

This paper introduces a more sophisticated modelling of the labour market functioning of the European member and candidate states through the introduction of labour supply curves in an applied general equilibrium model. A labour supply curve offers a middle way in labour supply modelling, sitting between the two commonly adopted extremes of spare capacity and full employment. The first part of the paper outlines the theoretical foundation of the labour supply curve. Real world data is then used to derive labour supply curves for each member state, along with Croatia and Turkey. Finally, the impact of the newly specified labour markets on the results of an illustrative scenario involving reform of the common agricultural policy is explored. The results of computable general equilibrium analysis with the labour supply curve confirm the theoretical expectation that modelling the labour supply through an upwards-sloping curve produces results that lie between the extremes of spare capacity of the labour factor and fully employed labour. This specification captures a greater degree of heterogeneity in the labour markets of the member and candidate states, allowing for a more nuanced modelling of the effects of policy reform, including welfare effects.

Social Investment and State Capacity. CEPS Working Document No. 419/February 2016

This paper looks at the difference between the levels and nature of social policy expenditure in northern and northwest European countries and the countries of southern, central, and eastern Europe, and examines the relationship between social investment and state capacity in these country groupings. The authors show that southern and eastern countries have a much greater preference for ‘compensating’ rather than ‘capacitating’ social policy spending. Furthermore, the state capacity in these countries is lower, which generates less state revenue. Based on these observations they conclude that low state capacity and low state revenue go hand in hand with the preference for capacitating social policies, as these policies involve less delegation and discretion than social investment policies. This paper shows that high state capacity is probably a necessary precondition for effective social investment policies, although some limited alternative paths do exist.