Evaluating Unemployment Policies: What do the Underlying Theories Tell Us?

The paper surveys unemployment policies for advanced market economies and evaluates them by examining the predictions of the underlying macroeconomic theories. The basic idea is that, for the most part, different unemployment policy prescriptions rest on different macroeconomic theories, and our confidence in the prescriptions should depend - at least in part - on the ability of these theories to predict some salient stylized facts about unemployment behaviour. The paper considers four types of policies: laissez-faire, demand-management, supply-side, and structural.