IDEAS home Printed from https://ideas.repec.org/a/oup/oxecpp/v68y2016i1p131-151..html
   My bibliography  Save this article

Real wage rigidity and the unemployment volatility puzzle in small open economies

Author

Listed:
  • Tord S. Krogh

Abstract

Standard search models of the labour market feature a volatility puzzle: labour market variables move too little in response to productivity shocks. I investigate if real wage rigidity is sufficient to solve this in an open economy. Starting from a closed economy benchmark in which wage rigidity makes labour market variables sufficiently volatile, I find that the puzzle reopens in the open economy, despite a rigid real wage. This is because terms of trade movements move the wedge between the consumer and producer real wage in such a way that labour market variables respond less to productivity shocks. A quantitative exercise shows that the effect of this mechanism can be sizeable.

Suggested Citation

  • Tord S. Krogh, 2016. "Real wage rigidity and the unemployment volatility puzzle in small open economies," Oxford Economic Papers, Oxford University Press, vol. 68(1), pages 131-151.
    • Handle: RePEc:oup:oxecpp:v:68:y:2016:i:1:p:131-151.
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1093/oep/gpv059
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ragnar Nymoen, 2017. "Between Institutions and Global Forces: Norwegian Wage Formation Since Industrialisation," Econometrics, MDPI, vol. 5(1), pages 1-54, January.
    2. Ragnar Nymoen & Victoria Sparrman & Bjorn Dapi, 2019. "Robustness of the Norwegian wage formation system and free EU labour movement. Evidence from wage data for natives," Discussion Papers 895, Statistics Norway, Research Department.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:oxecpp:v:68:y:2016:i:1:p:131-151.. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Oxford University Press (email available below). General contact details of provider: https://academic.oup.com/oep .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.