Flexibility in European wage structure and its implications for the European unemployment

This dissertation, titled “Flexibility in European Wage Structure and itsimplications for the European Unemployment,” studies the problem of high rates ofunemployment in Europe during the last few decades through the optic of European wagebehavior. It examines the European wage structure – within and between Europeancountries – to find out factors that drive wages and thereby, unemployment rates inEuropean countries. A conventional view of European problem of high unemploymentargues that European wages are explained by cross-country differences in certain labormarket policies and institutions, and that the policies and institutions at the country-levelare the principal source of the problem. This dissertation argues instead that Europeanwages are explained by differences in macroeconomic performances and in levels ofinternational competitiveness between countries and also between sectors within thecountries, and by certain continental and global level factors, and that a fullunderstanding of the effects of those factors is necessary to explain the European problem of high unemployment. By applying numerical techniques, namely a combination ofcluster analysis and discriminant function analysis, this dissertation finds that Europeanwages are driven by factors pointed out by the dissertation, which also explain the highrates of unemployment in Europe over the last few decades.