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Real Wages, Quantity Constraints and Equilibrium Unemployment: Belgium 1955-1988

Michel Lubrano (), Fatemeh Shadman and Henri Sneessens ()

No 1993011, Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES)

Abstract: This paper examines the determinants of equilibrium wage and unemployment rates in Belgium within the framework of a quantity rationing, right-to-manage model with decentralised wage setting. Empirical results are obtained by first using the Johansen maximum-likelihood procedure for the analysis of cointegration among the variables of interest. The information from this stage is then used to estimate a three-equation econometric model explaining the wage share, the unemployment rate and the capital gap. The slowdown in world trade is depicted as the most important factor explaining the rise in unemployment in Belgium, with dampening effects due to wage control policies imposed in the eighties. Because we obtain only two cointegrating relations, for three endogenous variables, our results are compatible with the hypothesis of path dependency and multiple equilibria.

Keywords: wages; unemployment (search for similar items in EconPapers)
Date: 1993-01-01
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Related works:
Journal Article: Real Wages, Quantity Constraints and Equilibrium Unemployment: Belgium, 1955-1988 (1996)
Working Paper: Real Wages, Quantity Constraints and Equilibrium Unemployment: Belgium, 1955-1988 (1993)
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