Unemployment and labor market policies in Greece

Abstract

The aim of this paper is, by focusing on the Greek experience, to examine the long-term
evolution of unemployment and to offer an explanation for the nature and causes of unemployment.
Analyzing the pattern of the Beveridge curve, it is observed an outward shift of the
unemployment-vacancy relation which is attributable to changing macroeconomic policies and
institutional structures throughout the last decade. A model that tests the effects of the various
labour market policies on the growth of the unemployment rate is presented. Active labor market
programs appear to be of minor importance in combating unemployment. Instead, unemployment
growth is found to be sensitive to variations in unemployment insurance expenditures. Finally, an
empirical test of the alternative hypothesis of the real wage gap does not provide evidence in favour
of the claim that excessive real wages are a major cause of increasing unemployment.