Unemployment Hysteresis, Wage Determination, and Labor Market Flexibility: The Case of Belgium

Reza Moghadam and Caroline Van Rijckeghem ()

IMF Staff Papers, 1995, vol. 42, issue 4, 882-893

Abstract: This paper examines unemployment hysteresis in the Belgian labor market. It estimates models of wage determination using aggregate and firm-level panel data. The conclusions are: (i) the long-term unemployed do not exert a negative impact on wages; and (ii) the incumbent workers, the “insiders,” exercise market power in wage determination, taking greater account of their own interests than those of the unemployed “outsiders;” and (iii) the wage indexation system can cause a downward rigidity in real wages. Recent initiatives, including programs aimed at the long-term unemployed and the young, are appropriate in view of the existence of insider power.

Date: 1995
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Persistent link: https://EconPapers.repec.org/RePEc:pal:imfstp:v:42:y:1995:i:4:p:882-893

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