 The Balassa-Samuelson model with job separationsNoel Gaston and Taiyo Yoshimi Japan and the World Economy, 2023, vol. 65, issue C Abstract: We incorporate sectoral job separation rates in a small open economy model to examine the Balassa-Samuelson (B-S) effect. Unequal separation rates give rise to compensating wage differentials. We simulate the model for Japan and replicate a feature of its economy that the nontradeables sector has higher wages and a higher separation rate compared to the tradeables sector. With productivity growth in the tradeables sector, labour moves from the tradeables sector to the nontradeables sector if tradeables and nontradeables are complements in consumption. The B-S effect is dampened. With a higher separation rate in the nontradeables sector, higher wages in the nontradeables sector amplifies this labour movement. Nevertheless, unemployment always falls due to a positive income effect. In contrast, the effect of productivity growth in the nontradeables sector is to lower the real exchange rate and raise unemployment. Keywords: Balassa-Samuelson; Unemployment; Compensating wage differential; Job matching (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:japwor:v:65:y:2023:i:c:s0922142522000573 DOI: 10.1016/j.japwor.2022.101172 Access Statistics for this article Japan and the World Economy is currently edited by Robert Dekle and Yasushi Hamao More articles in Japan and the World Economy from Elsevier |
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