In this paper I examine both the positive and negative aspects of the US labor market response to the economic world of the 1980s/1990s. I review the economic development that created difficulties in the US and other advanced economies post the first oil shock; consider how a decentralised labor market might be expected to respond to them; and summarise the American response. I conclude by assessing the social welfare consequences of the American response relative to that in Europe.

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March 1995     Paper Number CEPDP0231

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