Page 79 - ASEAN-EU Dialogue 2018: Regional and Inter-Regional Economic Cooperation: Identifying Priorities for ASEAN and the EU

root process if the bargaining parameter of the insider in the firm is equal to unity under the
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pure insider model. Otherwise, the unemployment rate would follow the stationary process .

Conclusion
This chapter made an attempt to compare labour market outcomes, namely unemployment rates,
labour market institutions and employment protection mechanisms, in Asia and Europe.
Results of secondary data analysis demonstrate that there is a remarkable difference in labour
market outcomes, especially unemployment rates, between the two regions. On the one hand,
the main characteristic of the Asian labour market is that the unemployment rates are more
stable and relatively lower than those in Europe. The above differences between Asian and
European labour market outcomes can be explained by the unique characteristics of labour
market institutions and socio-cultural background of the two regions. In the case of Europe, the
persistently high unemployment rate may be caused by the provision of generous
unemployment benefits. This has produced a challenge for policymakers to make a paradoxical
balance between labour market flexibility and the employment protection. In the case of Asia,
the relatively lower unemployment rates are mainly due to weaker unemployment protection
mechanisms, the existence of a large informal sector and the prevailing culture of self-help in
the region. However, an aging population poses its own threats for some Asian countries. In
this regard, both Asia and Europe may be able to benefit from non-standard and flexible work
st
systems which meet the needs of the 21 century workforce.

10 This paper’s theoretical foundation is based on the employment function within the insider-outsider theory
suggested by Blanchard and Summers (1986). More recently, Gustavsson and Österholm (2007) have provided
empirical evidence to indicate a distinctive difference between unemployment and employment hysteresis.
According to them, empirical tests tend to produce mixed evidence for hysteresis in unemployment. By contrast,
unit root tests are able to produce more consistent results to support hysteresis in employment.
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