Labour Market Asymmetries in a Monetary Union

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. www.econstor.eu http://www.ifw-kiel.de/pub/kap/kapcoll/kapcoll_02.htm I n s t i t u t f ü r W e l t w i r t s c h a f t a n d e r U n i v e r s i t ä t K i e l K i e l I n s t i t u t e f o r t h e W o r l d E c o n o m y Abstract This paper takes a first step in analysing how a monetary union performs in the presence of labour market asymmetries. Differences in wage flexibility, market power and country sizes are allowed for in a setting with both country-specific and aggregate shocks. The implications of asymmetries for both the overall performance of the monetary union and the country-specific situation are analysed. It is shown that asymmetries can have important effects, and that there are substantial spill-over effects. Among other things, it is found that aggregate output volatility is not strictly increasing in nominal rigidity but hump-shaped. A disproportionate share of the consequences of wage inflexibility may fall on small countries. In the case of country-specific shocks a country unambiguously benefits in terms of macroeconomic stability by becoming more flexible, but in general an inflexible country does not necessarily achieve more output stability by becoming more flexible. As this may be desirable for the monetary union as a whole, there is a risk of a 'reform deficit' in an asymmetric monetary union. Terms of use: Documents in Kiel Institute for World EconomicsJEL classification: E30, E52, F41

Downward Wage Rigidities and Optimal Monetary Policy in a Monetary Union*

“…2 2 This is different from the recent focus on frictional labour markets as, for example, ana‐ lysed in Campolmi and Faia (2006), Abbritti and Mueller (2007), Poilly and Sahuc (2008), Christoffel et al (2009), and Andersen and Seneca (2010). As a result, we ignore matching frictions that govern the transition from unemployment to employment and focus exclusively on rigidities in wage adjustment. …”

When Eastern Labour Markets Enter Western Europe: CEECs Labour Market Institutions Upon Euro Zone Accession

“…An important result (following from Brigden and Thomas (2003), but also Agell and Lundborg (1999), Andersen and Seneca (2008), Calmfors (2001b) and Elmeskov et al (1998) as well as Van Poeck and Borghijs (2001) is that, it is virtually impossible to write down a single reduced-form relationship linking either the unemployment rate or the inactivity rate (or some combination of the two) to wage pressure. This is because the relationship depends on the source of the shock that has caused either the unemployment rate or the inactivity rate to move.…”

Asymmetric Labor Market Institutions in the EMU and the Volatility of Inflation and Unemployment Differentials

“…20. See Benigno (2004) and Andersen and Seneca (2010) for similar assumptions. the correlation of productivity and preference shocks is lower than in the baseline calibration, the volatility of differentials is still increasing, except for the volatility of the unemployment differential, which is slightly decreasing in the degree of asymmetry in UR.…”

“…Other contributions related to our paper, but with a different focus, include Andersen and Seneca (), Poilly and Sahuc (), Dellas and Tavlas (), and Fahr and Smets ().…”