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Intersectoral Adjustment and the Dynamics of Wages and Employment Opportunities

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  • Slobodan Djajic
  • Douglas D. Purvis

Abstract

This paper analyses the dynamics of labour-market adjustment in response to sectoral shifts using a two sector model. We focus on the interaction between the level of wages and the productivity of finding a job. The model highlights to different speeds of adjustment under the assumption of imperfect intersectoral labour mobility and "myopic" labour market perceptions by potential migrants. It is possible for an increase in labour demand in one sector to lead to a temporary fall in that sector's relative wage. The dynamics of intersectoral migration may be characterized by "labour-overflows." Finally, the expanding sector may offer its unemployed workers a relatively higher probability of finding a job only in the early stages of adjustment -- during later stages that probability may fall below its initial value.

Suggested Citation

  • Slobodan Djajic & Douglas D. Purvis, 1985. "Intersectoral Adjustment and the Dynamics of Wages and Employment Opportunities," Working Paper 603, Economics Department, Queen's University.
    • Handle: RePEc:qed:wpaper:603
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    Cited by:

    1. Barry, Frank, 2009. "Social Partnership, Competitiveness and Exit from Fiscal Crisis," The Economic and Social Review, Economic and Social Studies, vol. 40(1), pages 1-14.
    2. Bonin, Holger, 2005. "Tarifpolitik, Entgeltflexibilität und Beschäftigung in Ostdeutschland (Colletive bargaining policy, wage flexibility and employment in eastern Germany)," Zeitschrift für ArbeitsmarktForschung - Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 38(2/3), pages 165-179.

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