What We Cannot Learn from the Irish Experience: A Fundamental Asymmetry of Asymmetric Shocks
AbstractA simple N-country specific-factor type model with imperfectly mobile labour is developed. It is shown that the effects of country-specific productivity shocks hitting a small country are fundamentally asymmetric. A positive shock will be accommodated by a moderate wage increase and sizeable in-migration, whereas a negative shock will be accommodated by a significant decrease in wages and moderate out-migration. The effects of shocks in a monetary union are discussed, and it is argued that the results are consistent with the recent Irish experience. The welfare effects of small economic fluctuations are also discussed.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2531.
Date of creation: Aug 2000
Date of revision:
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Other versions of this item:
- Andersson, Fredrik & Forslid, Rikard, 2000. "What We Cannot Learn from the Irish Experience: A fundamental Asymmetry of Asymmetric Shocks," Research Papers in Economics 2000:10, Stockholm University, Department of Economics.
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
- F22 - International Economics - - International Factor Movements and International Business - - - International Migration
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- Barry, Frank, 2002. "FDI, Infrastructure and the Welfare Effects of Labour Migration," CEPR Discussion Papers 3380, C.E.P.R. Discussion Papers.
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