Explaining High Unemployment in ECCU Countries

By Ronald James, Jemma Lafeuillee, Mike Xin Li, Gonzalo Salinas, Yevgeniya Savchenko

July 11, 2019

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Ronald James, Jemma Lafeuillee, Mike Xin Li, Gonzalo Salinas, and Yevgeniya Savchenko. Explaining High Unemployment in ECCU Countries, (USA: International Monetary Fund, 2019) accessed November 23, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

In recent years, unemployment rates in some ECCU countries have been among the highest globally. This paper evaluates several factors that could explain them, finding that high unit labor costs, in a context of strong unionization, are significantly associated with high structural unemployment, while the global crisis added a cyclical component. Our analysis also suggests that high-paid jobs in the public and tourism sectors, which have been growing considerably in recent decades, could have increased the reservation wage and lowered labor force participation. We find no indication that high structural unemployment is related to the phase out of EU preferences on bananas/sugar exports or to a skills mismatch. As expected, unemployment has been substantially, but only temporarily fueled by large natural disasters.

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

Publication Details

Pages:

32
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2019/144
Stock No:

WPIEA2019144
ISBN:

9781498318709
ISSN:

1018-5941

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