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What We Cannot Learn from the Irish Experience: A Fundamental Asymmetry of Asymmetric Shocks

Author

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  • Forslid, Rikard
  • Andersson, Fredrik

Abstract

A 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.

Suggested Citation

  • Forslid, Rikard & Andersson, Fredrik, 2000. "What We Cannot Learn from the Irish Experience: A Fundamental Asymmetry of Asymmetric Shocks," CEPR Discussion Papers 2531, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:2531
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    Cited by:

    1. Barry, Frank, 2002. "FDI, Infrastructure and the Welfare Effects of Labour Migration," CEPR Discussion Papers 3380, C.E.P.R. Discussion Papers.

    More about this item

    Keywords

    Migration; Asymmetric shocks;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration

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