Unemployment, Wage Push and the Labour Cost Competitiveness of Regions - The Case of Hungary, 1986-1996
Gabor Kertesi () and
Janos Kollo ()
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Janos Kollo: Labour Research Department, Institute of Economics, Hungarian Academy of Sciences
No 9905, Budapest Working Papers on the Labour Market from Institute of Economics, Centre for Economic and Regional Studies
The paper analyses regional relative wages using individual and firmlevel data from Hungary 1986-96. In regions hit hard by the transition shock labour costs fell substantially; the estimated elasticities of wages with respect to regional unemployment were in a range typical of mature market economies already in 1992-93. In later stages of the transition the hard-hit rural regions lost a large part of their cost advantage vis-ê-vis Budapest and the central agglomeration for reasons including spatial diseconomies and falling search activity among the registered unemployed. The paper argues that the time path observed in Hungary (a U-curve of relative labour costs in crisis-hit regions) may prevail in other economies calling the attention to the limits of wage flexibility as a cure to persistent regional crises.
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Persistent link: https://EconPapers.repec.org/RePEc:has:bworkp:9905
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