Wirtschaftswissenschaftliche Beiträge des Lehrstuhls für Volkswirtschaftslehre, Wirtschaftsordnung und Sozialpolitik, Universität Würzburg 31
The paper shows that a more flexible labor market is unequivocally necessary for a lasting and substantial reduction of unemployment. It furthermore points out that a more flexible labor market is even beneficial from a long-run distributional point of view. Hence, the key to liberalizing the labor market lies in overcoming widespread short-run distributional concerns. Increasing the short-run elasticity of labor demand with respect to the real wage by fostering venture capital markets appears to be a crucial stepping stone.