2 Labour market policies that reflect such principles may therefore be beneficial in most euro area countries. But it does not follow from this that there is an optimal model for the labour market that all must emulate. Economies are complex, and how labour markets function depends on manifold interactions at the national level. Designing structural reforms thus requires a nuanced and country-specific approach.
For example, how the labour market adjusts to shocks depends not only wage formation, but on the overall constellation of labour market institutions within national economies.