The Role of Labor Market Rigidities During the Transition Lessons From Poland
The transition to a market economy has been analyzed primarily from a stabilization prospective. To complement that approach, we focus on a pure relative price shock and subsequent price adjustments. A model of monopolistic competition with costly labor adjustment indicates that relative price shock...
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| Format: | eBook |
| Language: | English |
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Washington, D.C.
International Monetary Fund
1996
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| Series: | IMF Working Papers
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| Online Access: | |
| Collection: | International Monetary Fund - Collection details see MPG.ReNa |
| Summary: | The transition to a market economy has been analyzed primarily from a stabilization prospective. To complement that approach, we focus on a pure relative price shock and subsequent price adjustments. A model of monopolistic competition with costly labor adjustment indicates that relative price shocks can induce overall output decline because rigid sectoral real wages do not adjust to offset sectoral price changes, and firms that benefit from the price shock engage in monopolistic behavior. In Poland, empirical evidence suggests that relative wage rigidity contributed to lower employment and output, but there is no strong evidence that competition was important |
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| Physical Description: | 30 pages |
| ISBN: | 9781451849967 |