Efficiency Wages and Labor Mobility in an Open Economy
October 1, 1993
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Summary
The paper analyzes the role of labor market segmentation and relative wage rigidity in the transmission process of macroeconomic shocks in a two-sector optimizing model of a small open economy. The analysis is first conducted in the context of perfect intersectoral labor mobility. The discussion is then extended to consider the existence of short-run constraints on labor movements. The results highlight the role of efficiency considerations in the behavior of sectoral wages. A deflationary policy induces a reallocation of labor across sectors, but has no long-run effect on the unemployment rate.
Subject: Employment, Labor, Labor markets, Real wages, Wages
Keywords: WP
Pages:
40
Volume:
1993
DOI:
Issue:
079
Series:
Working Paper No. 1993/079
Stock No:
WPIEA0791993
ISBN:
9781451850161
ISSN:
1018-5941
