## Explaining High Unemployment in ECCU Countries

_IMF Working Papers, July 11, 2019_

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## Bibliographic details
- Authors: Ronald James, Jemma Lafeuillee, Mike Xin Li, Gonzalo Salinas, Yevgeniya Savchenko
- Published: July 11, 2019
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781498318709.001

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### Authors and Publication
- By Ronald James, Jemma Lafeuillee, Mike Xin Li, Gonzalo Salinas, Yevgeniya Savchenko
- July 11, 2019
- Working Paper No. 2019/144, Volume: 2019, Issue: 144
- Pages: 32
- DOI: https://doi.org/10.5089/9781498318709.001
- Stock No: WPIEA2019144
- ISBN: 9781498318709
- ISSN: 1018-5941

### Summary of Principal Findings
- In recent years, unemployment rates in some ECCU countries have been among the highest globally.
- High unit labor costs, in a context of strong unionization, are significantly associated with high structural unemployment.
- The global crisis added a cyclical component to unemployment.
- Growth of high-paid jobs in the public and tourism sectors, which have expanded considerably in recent decades, could have increased the reservation wage and lowered labor force participation.
- There is no indication that high structural unemployment is related to the phase out of EU preferences on bananas/sugar exports.
- There is no indication that high structural unemployment is related to a skills mismatch.
- Large natural disasters have substantially, but only temporarily, fueled unemployment.

### Analytical Themes and Evidence
- Labor costs and institutions:
  - High unit labor costs correlated with high structural unemployment.
  - Strong unionization provides the institutional context amplifying the labor-cost effect.
- Cyclical vs. structural components:
  - The global crisis contributed a cyclical component on top of structural unemployment drivers.
- Sectoral composition and reservation wages:
  - Expansion of high-paid public sector and tourism jobs likely raised reservation wages, potentially reducing labor force participation.
- Excluded explanations:
  - Phase-out of EU preferences for bananas/sugar exports not supported as a driver of high structural unemployment.
  - No evidence found for a skills mismatch explaining high structural unemployment.
- Natural disasters:
  - Large natural disasters caused substantial short-term increases in unemployment, but these effects were temporary.

### Subjects and Keywords
- Subject: Employment, Labor, Public sector wages, Unemployment, Unemployment rate, Wages
- Keywords: Caribbean, Central Asia, country, demonstration effect, East Asia, ECCU, ECCU country, ECCU economy, ECCU wage, Employment, Global, labor market factors, Public sector wages, reservation wage, Sub-Saharan Africa, unemployment, Unemployment rate, wage, wage growth, wage inflation, Wages, WP

*IMF Working Papers — "Explaining High Unemployment in ECCU Countries" (Working Paper No. 2019/144, July 11, 2019).*

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_Source: https://www.imf.org/en/publications/wp/issues/2019/07/11/explaining-high-unemployment-in-eccu-countries-46971_