The Response of Wages and Labor Supply Movements to Employment Shocks Across Europe and the United States

December 1, 1994

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Format: Chicago

Alun H. Thomas The Response of Wages and Labor Supply Movements to Employment Shocks Across Europe and the United States, (USA: International Monetary Fund, 1994) accessed November 21, 2024

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 assesses the responsiveness of wages and labor force movements to employment shocks across British and U.S. regions and across Europe using a multivariate vector autoregression technique. The paper finds inflexible real wages in all three areas in that each area’s real wage responds very little to employment shocks. However, the response of the labor force to employment shocks is much greater in the United States compared to Europe. The strong labor force response in the United States prevents any persistence in relative regional unemployment rates whereas the lack of mobility in Europe results in persistent unemployment rate differentials across British regions and European nations. Europe must therefore adopt measures to reduce barriers to immobility if it is to succeed in moderating the persistence in relative unemployment rates.

Subject: Employment, Labor, Labor force, Real wages, Unemployment, Unemployment rate

Keywords: Employment, Employment shock, Europe, Labor force, Labor force, Real wage aspiration, Real wages, Standard deviation, Unemployment, Unemployment rate, Wage outcome, Wage response, WP

Publication Details

Pages:

30
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1994/158
Stock No:

WPIEA1581994
ISBN:

9781451857535
ISSN:

1018-5941

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