International Spillover of Labor Market Reforms

Author/Editor:

Mai Dao

Publication Date:

April 1, 2008

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper uses a dynamic economy model, with unionized labor markets, to analyze the effects of labor market reforms, similar to those recently introduced in Germany, on the domestic and trading partner economies. The model is calibrated on Germany and the rest of the Euro area. The results indicate that German labor market reforms have positive spillover effects on the rest of the Euro area, which operate through the channel of trade, relative price adjustment, and financial market integration. Compared to a competitive labor market, setting, unionization dampens the positive response of the domestic economy and magnifies the spillover effects.

Series:

Working Paper No. 2008/113

Subject:

Consumption Employment Labor markets Terms of trade Wages

English

Publication Date:

April 1, 2008

ISBN/ISSN:

9781451869736/1018-5941

Stock No:

WPIEA2008113

Pages:

35

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