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RESEARCH PRODUCT

Western European Studies: Economics

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In this entry, we overview major developments of Western European studies in Economics in the last two decades. Given the richness of contributions in this field, we decided to restrict our discussion to three general topics: the theory of economic and financial integration; the economics of unemployment and the microeconomic foundations of market regulation. In the Section 1, we present the evolutions of thought on European monetary and economic integration, with particular emphasis on the discussion of exchange rate regimes, the role of policy authorities, and the cost–benefit analysis related to the establishment of a European monetary union. In Section 2, we examine some results produced by the vast literature on the comparatively higher levels of European unemployment. Three main issues have been chosen in this respect: (i) the effects of globalization with growing imports from low-wage countries; (ii) the effects of the transition to the monetary union; and (iii) the effects of a rigidly constrained labor market structure. Finally, in Section 3, we consider how European economic thought has changed on the traditional theme of the optimal relationship between markets and authorities. We argue that, ever since the 1980s, the analytical rationale has gradually shifted from a modern refinement of traditional theories of market failures to a greater reliance on alternative approaches based on incentives and mechanism designs. Specific mention is made of contributions that dealt with firm privatization and with procedures of anticompetitive behaviors.