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The Response of Wages and Labor Supply Movements to Employment Shocks Across Europe and the United States

Author

Listed:
  • Mr. Alun H. Thomas

Abstract

This paper assesses the responsiveness of wages and labor force movements to employment shocks across British and U.S. regions and across Europe using a multivariate vector autoregression technique. The paper finds inflexible real wages in all three areas in that each area’s real wage responds very little to employment shocks. However, the response of the labor force to employment shocks is much greater in the United States compared to Europe. The strong labor force response in the United States prevents any persistence in relative regional unemployment rates whereas the lack of mobility in Europe results in persistent unemployment rate differentials across British regions and European nations. Europe must therefore adopt measures to reduce barriers to immobility if it is to succeed in moderating the persistence in relative unemployment rates.

Suggested Citation

  • Mr. Alun H. Thomas, 1994. "The Response of Wages and Labor Supply Movements to Employment Shocks Across Europe and the United States," IMF Working Papers 1994/158, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:1994/158
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    Citations

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    Cited by:

    1. Loïc Cadiou & Stéphanie Guichard & Mathilde Maurel, 1999. "La diversité des marchés du travail en Europe : Quelles conséquences pour l'Union Monétaire," Working Papers 1999-11, CEPII research center.
    2. Belot, M.V.K., 2001. "Why is the Employment Protection Stricter in Europe than in the US?," Discussion Paper 2001-79, Tilburg University, Center for Economic Research.
    3. Loïc Cadiou & Stéphanie Guichard & Mathilde Maurel, 2000. "Disparités institutionnelles et flexibilité des marchés du travail dans l'UE," Économie et Statistique, Programme National Persée, vol. 332(1), pages 49-63.
    4. repec:hal:spmain:info:hdl:2441/711 is not listed on IDEAS
    5. repec:spo:wpecon:info:hdl:2441/711 is not listed on IDEAS
    6. repec:hal:wpspec:info:hdl:2441/711 is not listed on IDEAS
    7. Belot, M.V.K., 2001. "Why is the Employment Protection Stricter in Europe than in the US?," Other publications TiSEM 1b89c06b-a254-4d69-8d7f-a, Tilburg University, School of Economics and Management.
    8. Stéphanie Guichard & Jean-Pierre Laffargue, 2001. "Comparaison de la formation des salaires dans un panel de pays industrialisés," Économie et Prévision, Programme National Persée, vol. 147(1), pages 37-49.
    9. Michèle Belot, 2007. "Why is Employment Protection Stricter in Europe than in the United States?," Economica, London School of Economics and Political Science, vol. 74(295), pages 397-423, August.

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