Efficiency Wages and Labor Mobility in an Open Economy

The paper analyzes the role of labor market segmentation and relative wage rigidity in the transmission process of macroeconomic shocks in a two-sector optimizing model of a small open economy. The analysis is first conducted in the context of perfect intersectoral labor mobility. The discussion is...

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Bibliographic Details
Main Author: Santaella, Julio
Other Authors: Agénor, Pierre-Richard
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 1993
Series:IMF Working Papers
Subjects:
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
Description
Summary:The paper analyzes the role of labor market segmentation and relative wage rigidity in the transmission process of macroeconomic shocks in a two-sector optimizing model of a small open economy. The analysis is first conducted in the context of perfect intersectoral labor mobility. The discussion is then extended to consider the existence of short-run constraints on labor movements. The results highlight the role of efficiency considerations in the behavior of sectoral wages. A deflationary policy induces a reallocation of labor across sectors, but has no long-run effect on the unemployment rate
Physical Description:40 pages
ISBN:9781451850161