The European Commission Directorate-General for Economic and Financial Affairs (DG ECFIN) and the Vienna Institute for International Economic Studies have publicised the European Economy Economic Papers No. 346 on the 'Adjustment capacity of labour markets of the Western Balkan countries', with a focus on labour markets, and background studies on several countries of the region.

The main question addressed in this study is the performance of the labour markets in the Western Balkans; to find out whether they can deliver growth of employment and decline of unemployment in the medium run and whether they can withstand short-term shocks due to changes in demand or supply. The study finds that there is an important case for improving the rule of law and the quality of public services in general in the fight against very low participation and employment rates in the region, as well as very high unemployment. Wages, with some exceptions in specific sectors, do not seem to be mis-aligned with respect to productivity developments. There is some indication of possible positive effects from adjusting employment protection legislation, especially for women. The study also identifies an important role for income policies in some of the countries as an important complement to labour market policies.

Volume I (final report) and II (country studies) are available for download.