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The Rise in European Unemployment

            
            
            
            
             The main idea of this article is to described the reasons of a steady increase of unemployment rate in Europe during 1990s and compare this research with unemployment rate in USA in that time. The author used econometric model based on the bargaining framework to outlined by McDonald and Solow(1981), also the information of supply was not observed so Graeme Chamberlin used Kalman Filter. The reason of the growth of unemployment is a inability of supply side to respond quickly on the adverse labour market behavior demand.
             At the begging of article the author compare and explain situations of unemployment which were formed at labour market of USA and Europe, especially, Euro-11 nations. At the figure one we can see that European market is rigid and inflexible in comparison with USA. (Graeme Chamberlin 2006) The main factor of that situation was generous unemployment benefits and lack of pressure on the unemployed also high overall labour taxes and poor educational standards at the lowest segment of the labour market influenced on huge unemployment rate. Moreover, I would like to notice that not only this factors led to that but also government strategy of trade and counter-inflationary demand system contributed to (Bean 1994) On the other hand USA labour market didn't have such mechanism which had a great influence on unemployment. This though was supported by Blanchard and Wolfers (2000). So in my point of view the reason why author decided to write about this theme was versatility of factors that contributed to the rise of unemployment and non-existence of main on this issue.
             As I meant earlier this article was based on the alternative bargaining models by McDonald and Slow (1981). The main idea of this models is that bargain over wages occurs between two groups: the firm and the labour suppliers (sometimes unions). The main objectives of these two parties give rise to cointegrating vectors indicative of the demand and supply parts of the labour market, with both of these vectors entering the wage equation.


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