# 99-001/3 (1999-01-21)

Cees Gorter, Vrije Universiteit Amsterdam; Jacques Poot, Victoria University of Wellington
labour markets; flexibility; deregulation; international comparisons
JEL codes:
I38; J58; O57

Unemployment remains a major economic and social problem in many developedeconomies. Thispaper provides theoretical and empirical perspectives on the impact of labourmarket deregulation as a means of combatting unemployment and of enhancing competitivewage determination. The paper focusses specifically on The Netherlands and NewZealand, two small open economies in which unemployment rates reduced to close to half of theirrespective post-1980 peaks. The labour market policies that contributed to these outcomes arereferred to as the "Polder" model and the "Kiwi" model respectively. Despite some similarities,there are significant differences between these models. These are highlighted in thepaper. It is found that the effects of deregulation are hard to separate out from other influenceson the labour market. The success of the deregulation policies is easily overstated by aselective use of labour market indicators, or by making trough to peak comparisons along thebusiness cycle.