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  • Discussion of:Labour markets during recessions – evidence on the role of wage rigidity and hysteresisby JuhaKilponen, David Lodge, Rolf Strauch and JuusoVanhala
    Steinar Holden
    Department of Economics, University of Oslo
    http://folk.uio.no/sholden/
    Workshop in Sveriges Riksbank
    2 September 2010
  • Research questions
    How does the labour market react during financial crises and other downturns?
    Are labour market reactions to financial crises systematically different from normal downturns?
    Unemployment, employment and output
    Hysteresis and long-term unemployment
    Wages and wage rigidity
    Employment and output effects
  • Overall evaluation
    Lots of interesting charts and empirical analyses
    Cover a broad range of important issues
    Provides a useful overview of labour market reactions in downturns
    Does not ”dig deep” on any specific issue
    Often low statistical significance
    Little analysis of heterogeneity and mechanisms
  • Business cycle dating
    ”Throughs and peaks – any quarter lower or higher than the preceding and succeeding two quarters”
  • Business cycle dating
    ”Throughs and peaks – any quarter lower or higher than the preceding and succeeding two quarters”
  • Unemployment rates Nordic countries
  • Unemployment rates Nordic countries
  • Unemployment rates Nordic countries
  • Unemployment rates Nordic countries
  • Productivitygrowthreducescost – but not this time (?)
  • Wageequation
  • Wageequation
    • No wage share term – in contrast to theory and to a wealth of evidence on time series and panel data
    • Blanchflower & Oswald (1994), Nymoen & Rødseth (2003), Holden & Nymoen (2002), Forslund, Gottfries & Westermark (2008), Bårdsen & Nymoen (2009) ……….
    • Surprisingthatemployment is not found to affectcompensation – in contrast to most empirical studies
    • ”Compensationshocksloweremploymentgrowth, butregarding output and prices, thedemandeffect from higherwagesseems to prevail and push up both.”
    • Confidence bands in crises
    • Confidence bands in crises
    • “The impact on nominal growth rates however exceeds the output effect. As a result, employment growth drops remarkably and eventually turns negative. “
    • Real compensation (?) and unemployment – two changes at the same time make it hard to interpret the results
    • How to interpret effect on unemployment?
  • “At the same time, note that there are several countries where the real product wage had fallen below 2008Q1 level already prior to 2009Q1. This is in contrast to the ERM II crisis, where the real wage shows far more inertia. In fact, the real wage shows a countercyclical pattern in the large majority of the countries during the ERM II crisis. This leads us to conjecture that nominal wage inertia is less prevalent during the current crisis.”
  • Producer prices - annualgrowth rates
  • Labour compensation– annualgrowth rates
  • Other evidence suggest that downward nominal wage rigidity is weaker(Holden & Wulfsberg, 2010)
  • Summing up
    Lots of interesting charts and empirical analyses
    Cover a broad range of important issues
    Provides a useful overview of labour market reactions in downturns
    Does not ”dig deep” on any specific issue
    Often low statistical significance
    Little analysis of heterogeneity and mechanisms