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This publication analyses European labour markets and the potential contribution of transitional labour markets (TLMs) to a solution for the serious unemployment problem experienced by Europe for nearly three decades. As an analytical concept, TLM refers to the blurring of the borders between wage employment and other productive activities. As a normative concept the TLM framework identifies new types of institutional arrangements to prevent transitions from becoming gates to social exclusion. The first part describes the dynamics of modern labour markets. Part two discusses the theoretical and normative developments of the TLM approach. The final section strategically applies the TLM framework to different types of transition and policy areas such as working-time regulation and active labour market policies. The final chapter discusses the reform of the European Social Model in line with the proposals of the TLM framework. The contents are: The dynamics of full employment: an introductory overview / Bernard Gazier and Gunther Schmid (p. 1-20); Employment systems in transition: explaining performance differentials of post-industrial economies / Gunther Schmid (p. 23-80); Flexibility and security: labour market policy in Austria, Denmark, Ireland and the Netherlands / Peter Auer (p. 81-105); Employment systems and transitional labour markets: a comparison of youth labour markets in Germany, France and the UK / Patrick Detzel and Jill Rubery (p. 106-148); Towards a theory of transitional labour markets / Gunther Schmid (p. 151-195); Transitional labour markets: from positive analysis to policy proposals / Bernard Gazier (p. 196-232); The legal regulation of transitional labour markets / Ton Wilthagen and Ralf Rogowski (p. 233-273); The dynamics of employment in the European Union: an exploratory analysis / Thomas Kruppe (p. 277-297); From salary workers to entrepreneurial workers? / Nigel Meager and Peter Bates (p. 298-338); Working-time transitions and transitional labour markets / Dominique Anxo and Jacqueline O'Reilly (p. 339-364); How can active policies be made more effective? / Jaap de Koning and Hugh Mosley (p. 365-392); Transitional labour markets and the European social model: towards a new employment compact / Gunther Schmid (p. 393-435).