Exchange Rates and Wages in an Integrated World

Prachi Mishra and Antonio Spilimbergo

American Economic Journal: Macroeconomics, 2011, vol. 3, issue 4, 53-84

Abstract: We analyze how the pass-through from exchange rate to domestic wages depends on the degree of integration between domestic and foreign labor markets. Using data from 66 countries over the period 1981-2005, we find that the elasticity of domestic wages to real exchange rate is 0.15 after a year for countries with high barriers to external labor mobility, but about 0.40 in countries with low barriers to mobility. The result is robust to the inclusion of various controls, different measures of exchange rates, and definitions of labor market integration. These findings call for including labor mobility in macro models of external adjustment. (JEL F16, F31, J31)

JEL-codes: F16 F31 J31 (search for similar items in EconPapers)
Date: 2011
Note: DOI: 10.1257/mac.3.4.53
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

Downloads: (external link)
http://www.aeaweb.org/articles.php?doi=10.1257/mac.3.4.53 (application/pdf)
http://www.aeaweb.org/aej/mac/data/2010-0079_data.zip (application/zip)
http://www.aeaweb.org/aej/mac/app/2010-0079_app.pdf (application/pdf)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
Working Paper: Exchange Rates and Wages in an Integrated World (2009)
Working Paper: Exchange Rates and Wages in an Integrated World (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:aejmac:v:3:y:2011:i:4:p:53-84

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

American Economic Journal: Macroeconomics is currently edited by Simon Gilchrist

More articles in American Economic Journal: Macroeconomics from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().