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Labour Supply Curves for EU Member and Candidate States: An applied general equilibrium analysis

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  • Schutes, Lindsay

Abstract

This paper introduces a more sophisticated modelling of the labour market functioning of the European member and candidate states through the introduction of labour supply curves in an applied general equilibrium model. A labour supply curve offers a middle way in labour supply modelling, sitting between the two commonly adopted extremes of spare capacity and full employment. The first part of the paper outlines the theoretical foundation of the labour supply curve. Real world data is then used to derive labour supply curves for each member state, along with Croatia and Turkey. Finally, the impact of the newly specified labour markets on the results of an illustrative scenario involving reform of the common agricultural policy is explored. The results of computable general equilibrium analysis with the labour supply curve confirm the theoretical expectation that modelling the labour supply through an upwards-sloping curve produces results that lie between the extremes of spare capacity of the labour factor and fully employed labour. This specification captures a greater degree of heterogeneity in the labour markets of the member and candidate states, allowing for a more nuanced modelling of the effects of policy reform, including welfare effects.

Suggested Citation

  • Schutes, Lindsay, 2012. "Labour Supply Curves for EU Member and Candidate States: An applied general equilibrium analysis," Working papers 127729, Factor Markets, Centre for European Policy Studies.
    • Handle: RePEc:ags:famawp:127729
    DOI: 10.22004/ag.econ.127729
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    File URL: https://ageconsearch.umn.edu/record/127729/files/FM%20WP%20No%2026%20Shutes%20Labour%20Supply%20Curves.pdf
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    References listed on IDEAS

    as
    1. Shutes, Lindsay & Rothe, Andrea & Banse, Martin, 2012. "Factor Markets in Applied Equilibrium Models: The current state and planned extensions towards an improved presentation of factor markets in agriculture," Working papers 122851, Factor Markets, Centre for European Policy Studies.
    2. Berrittella, Maria, 2012. "Modelling the labour market of minority ethnic groups," Journal of Policy Modeling, Elsevier, vol. 34(3), pages 389-402.
    Full references (including those not matched with items on IDEAS)

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