ABSTRACT
Supporters of the European social model have traditionally argued that public interventions in the labour market promote both equity and efficiency. Old-style institutional arguments are normally used in support of this position. On the one hand, it is suggested that employment regulations close off the possibility of enterprises pursuing low-wage commercial strategies. Instead employers are encouraged to build up productive capacity. On the other hand, it is claimed that firms that comply with regulations and offer advantageous employment contracts and create good working conditions benefit by attracting the more capable in the labour market.
