A study by Cahuc showed that if Spain switched to French labour laws, its unemployment rate would drop by 40%.
Spain is more economically backwards than most nations in Western Europe. As a public finance economist, my gut instinct is to blame bad fiscal policy.
And there’s certainly plenty of evidence for that view. After all, taxes drive a huge wedge between pre-tax income and post-tax consumption. So there is not much incentive to be a productive member of society.
But it’s important to remember that fiscal policy is just one of the ways politicians can hurt an economy.
In an article for the Foundation for Economic Education, Michael Peterson explains how labor law is stifling job creation in the Spanish economy.
Spain doesn’t suffer from a labor shortage like in the United States, but something much worse—a sclerotic labor market marked by…Employment Protection Legislation (EPL) that constrains employers from hiring and firing workers. …These figures help explain the high unemployment rates observed in Spain over the past three…
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Utopia, you are standing in it! 
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