The Impact of Labour Market Deregulation: Lessons from the "Kiwi"and "Polder" Models
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Unemployment remains a major economic and social problem in many developedeconomies. This paper provides theoretical and empirical perspectives on the impact of labour market deregulation as a means of combatting unemployment and of enhancing competitive wage determination. The paper focusses specifically on The Netherlands and New Zealand, two small open economies in which unemployment rates reduced to close to half of their respective post-1980 peaks. The labour market policies that contributed to these outcomes are referred to as the "Polder" model and the "Kiwi" model respectively. Despite some similarities, there are significant differences between these models. These are highlighted in the paper. It is found that the effects of deregulation are hard to separate out from other influences on the labour market. The success of the deregulation policies is easily overstated by a selective use of labour market indicators, or by making trough to peak comparisons along the business cycle.