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Explaining High Unemployment in ECCU Countries

Gonzalo Salinas, Mike Xin Li, Ronald James, Jemma Lafeuillee and Yevgeniya Savchenko

No 2019/144, IMF Working Papers from International Monetary Fund

Abstract: In recent years, unemployment rates in some ECCU countries have been among the highest globally. This paper evaluates several factors that could explain them, finding that high unit labor costs, in a context of strong unionization, are significantly associated with high structural unemployment, while the global crisis added a cyclical component. Our analysis also suggests that high-paid jobs in the public and tourism sectors, which have been growing considerably in recent decades, could have increased the reservation wage and lowered labor force participation. We find no indication that high structural unemployment is related to the phase out of EU preferences on bananas/sugar exports or to a skills mismatch. As expected, unemployment has been substantially, but only temporarily fueled by large natural disasters.

Keywords: WP; ECCU country; wage; country; ECCU; reservation wage; Caribbean; labor market factors; unemployment; wage growth; wage inflation; ECCU wage; demonstration effect; ECCU economy; Unemployment rate; Employment; Wages; Public sector wages; Global; East Asia; Central Asia; Sub-Saharan Africa (search for similar items in EconPapers)
Pages: 32
Date: 2019-07-11
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Handle: RePEc:imf:imfwpa:2019/144