Does Eurosclerosis Matter? Institutional Reform and Labor Market Performance in Central and Eastern Europe

Whether or not labour market rigidities are an important contributor to persistently high levels of unemployment remains at the centre of an important debate in Europe. European labour markets are often viewed as rigid and inflexible in opposition to those in North America where legislation is less protective and fosters more mobility. This paper shows that the labour market policies adopted by Central and Eastern European countries, aspiring to join the European Union, do not appear excessively rigid. However, significant and wide-ranging economic reform programs make it difficult to assess the impact of labour market institutions.