At Home and Abroad

Winner of the 2002 Richard A. Lester Prize for Outstanding Book in Labor Economics and Industrial Relations

"At Home and Abroad is an admirable work of analysis and exposition-a clear, highly informative, and solidly grounded study of how labor market institutions affect employment and relative wages."
-STEVEN DAVIS, University of Chicago

"Francine Blau and Lawrence Kahn have produced a thoughtful and compelling analysis of how market forces and institutions shape national differences in wage inequality, unemployment, and gender pay gaps. For those seeking to understand the benefits, as well as the costs, of the deregulated and flexible U.S. labor market, this is a must-read book."
-LAWRENCE KATZ, Harvard University

"Francine Blau and Lawrence Kahn have produced a masterful synthesis of available evidence on how labor market institutions affect wages and employment. As their review makes clear, the experiences of other countries contain important lessons for U.S. labor market policy. This book should be required reading for anyone with an interest in realistic options for improving the lot of American workers."
-KATHARINE G. ABRAHAM, University of Maryland

"The United States has led the industrialized world in rising income inequality and declining unemployment in the past two decades. Francine Blau and Lawrence Kahn present the definitive analysis that sorts out the evidence on these and related phenomena, isolating the roles of institutions and macroeconomic forces. At Home and Abroad is must reading for macroeconomists, labor economists, and any non- specialist who is interested in these central economic and social outcomes."
-DANIEL S. HAMERMESH, University of Texas at Austin

Throughout the latter part of the 20th century, the U.S. labor market performed differently than the labor markets of the world's other advanced industrialized societies. In the early 1970s, the United States had higher unemployment rates than its Western European counterparts. But after two oil crises, rapid technological change, and globalization rocked the world's economies, unemployment fell in the United States, while increasing dramatically in other nations. At the same time, wage inequality widened more in the United States than in Europe. In At Home and Abroad, Cornell University economists Francine D. Blau and Lawrence M. Kahn examine the reasons for these striking dissimilarities between the United States and its economic allies.

Comparing countries, the authors find that governments and unions play a far greater role in the labor market in Europe than they do in the United States. It is much more difficult to lay off workers in Europe than in the United States, unemployment insurance is more generous in Europe, and many fewer Americans than Europeans are covered by collective bargaining agreements. Interventionist labor market institutions in Europe compress wages, thus contributing to the lower levels of wage inequality in the European Union than in the United States.

Using a unique blend of microeconomic and microeconomic analyses, the authors assess how these differences affect wage and unemployment levels. In a lucid narrative, they present ample evidence that, as upheavals shook the global economy, the flexible U.S. market let wages adjust so that jobs could be maintained, while more rigid European economies maintained wages at the cost of losing jobs.

By helping readers understand the relationship between different economic responses and outcomes, At Home and Abroad makes an invaluable contribution to the continuing debate about the role institutions can and should play in creating jobs and maintaining living standards.

FRANCINE D. BLAU is Frances Perkins Professor of Industrial and Labor Relations, and LAWRENCE M. KAHN is Professor of Labor Economics and Collective Bargaining, School of Industrial and Labor Relations, Cornell University.