International spill-over effects of labour market rigidities

Morten Spange ()

Journal of Macroeconomics, 2008, vol. 30, issue 1, 157-178

Abstract: This paper analyses the implications of real wage rigidities in a two-country stochastic general equilibrium model. It is shown how real wage rigidities in one country affect welfare in both countries. By assuming that the labour unions within each country decide whether wages are flexible or rigid, it is found that wages will be flexible in either none, one or both of the countries. Hence, even in a symmetric model flexible wages in one country and rigid wages in the other may be an equilibrium. Since there are international spill-over effects of the choice of wage setting regime, the utilitarian solution is also considered. Interestingly, this does not necessarily entail more real wage flexibility than in the Nash equilibrium.

Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0164-0704(06)00088-7
Full text for ScienceDirect subscribers only

Related works:
Working Paper: International Spill-over Effects of Labour Market Rigidities
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:eee:jmacro:v:30:y:2008:i:1:p:157-178

Access Statistics for this article

Journal of Macroeconomics is currently edited by Douglas McMillin and Theodore Palivos

More articles in Journal of Macroeconomics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().