Unemployment, Wage Push and the Labour Cost Competitiveness of Regions - The Case of Hungary, 1986-1996
AbstractThe 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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Bibliographic InfoPaper provided by Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences in its series Budapest Working Papers on the Labour Market with number 9905.
Length: 45 pages
Date of creation: Jun 1999
Date of revision:
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- Iara, Anna & Traistaru, Iulia, 2003. "How flexible are wages in EU accession countries?," ZEI Working Papers B 25-2003, ZEI - Center for European Integration Studies, University of Bonn.
- Karoly Fazekas, 2000. "The impact of foreign direct investment inflows on regional labour markets in Hungary," Budapest Working Papers on the Labour Market 0008, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
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