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N° 1998 - 13 |
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| November |
| Wages and Unemployment: Trade-Off under
Different Labour Market Paradigms |
Olivier Bontout
Sébastien Jean |
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| The aim of this study is to assess and compare
the impact of trade and technology shocks under different labour market paradigms.
This is done using a stylised computable general equilibrium (CGE) model, compatible
with the new trade theories. We assume alternatively that wages are flexible,
that relative wages are rigid, and that wages are bargained (WS-PS model). This
latter case appears as intermediary between both of the others, which correspond
respectively to perfect flexibility and perfect rigidity of the wage structure.
We find that the more rigid the wage structure is, the less favourable the effect
on welfare is and the less important the evolution of income inequalities are.
This "trade-off" between welfare and inequalities is quantified, and
it is shown to be fairly independent of the nature of these asymmetrical shocks.
For unskilled labour, the labour market functioning boils down to a trade-off
between real wages and employment. We also find that the less substitutable the
production factors are, the lower the employment-cost of a given correction in
relative wages is, and the less costly a decrease in inequalities through a different
labour market setting is in terms of welfare. |
Abstract |
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| Labour market functioning; International
trade; Skilled-biased technical change; General equilibrium model |
Keywords |
| D58, F12, J5 |
JEL classification |
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