2010
Discussion of:
Labour markets during recessions –
evidence on the role of wage rigidity and
hysteresis
by Juha Kilpon...
2010
Research questions
 How does the labour market react
during financial crises and other
downturns?
 Are labour marke...
2010
Overall evaluation
 Lots of interesting charts and empirical
analyses
 Cover a broad range of important issues
 Pr...
2010
Business cycle dating
 ”Throughs and peaks – any quarter
lower or higher than the preceding and
succeeding two quart...
2010
Business cycle dating
 ”Throughs and peaks – any quarter
lower or higher than the preceding and
succeeding two quart...
2010
Unemployment rates
Nordic countries
0
2
4
6
8
10
12
14
16
18
Finland
Norway
Sweden
2010
Unemployment rates
Nordic countries
0
2
4
6
8
10
12
14
16
18
Finland
Norway
Sweden
2010
Unemployment rates
Nordic countries
0
2
4
6
8
10
12
14
16
18
Finland
Norway
Sweden
2010
Unemployment rates
Nordic countries
0
2
4
6
8
10
12
14
16
18
Finland
Norway
Sweden
2010
Productivity growth reduces
cost – but not this time (?)
2010
2010
2010
2010
2010
Wage equation
2010
Wage equation
 No wage share term – in contrast to
theory and to a wealth of evidence on
time series and panel data
...
2010
2010
2010
 Surprising that employment is not found
to affect compensation – in contrast to
most empirical studies
2010
 ”Compensation shocks lower employment growth, but
regarding output and prices, the demand effect from
higher wages ...
2010
•Confidence bands in crises
2010
•Confidence bands in crises
•“The impact on nominal growth rates however exceeds the output
effect. As a result, empl...
2010
•Real compensation (?) and unemployment – two changes at the same
time make it hard to interpret the results
•How to ...
2010
2010
2010
 “At the same time, note that there are several
countries where the real product wage had fallen
below 2008Q1 level ...
2010
Producer prices - annual growth
rates
-6
-4
-2
0
2
4
6
8
10
United States 1
EU27 total 2
OECD total
2010
Labour compensation
– annual growth rates
0
1
2
3
4
5
6
7
8
United States
EU27 total
OECD total
Euro area
2010
Other evidence suggest that downward
nominal wage rigidity is weaker
(Holden & Wulfsberg, 2010)
2010
2010
2010
2010
Summing up
 Lots of interesting charts and empirical
analyses
 Cover a broad range of important issues
 Provides a...
2010
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  1. 1. 2010 Discussion of: Labour markets during recessions – evidence on the role of wage rigidity and hysteresis by Juha Kilponen, David Lodge, Rolf Strauch and Juuso Vanhala Steinar Holden Department of Economics, University of Oslo http://folk.uio.no/sholden/ Workshop in Sveriges Riksbank 2 September 2010
  2. 2. 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
  3. 3. 2010 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
  4. 4. 2010 Business cycle dating  ”Throughs and peaks – any quarter lower or higher than the preceding and succeeding two quarters”
  5. 5. 2010 Business cycle dating  ”Throughs and peaks – any quarter lower or higher than the preceding and succeeding two quarters”
  6. 6. 2010 Unemployment rates Nordic countries 0 2 4 6 8 10 12 14 16 18 Finland Norway Sweden
  7. 7. 2010 Unemployment rates Nordic countries 0 2 4 6 8 10 12 14 16 18 Finland Norway Sweden
  8. 8. 2010 Unemployment rates Nordic countries 0 2 4 6 8 10 12 14 16 18 Finland Norway Sweden
  9. 9. 2010 Unemployment rates Nordic countries 0 2 4 6 8 10 12 14 16 18 Finland Norway Sweden
  10. 10. 2010 Productivity growth reduces cost – but not this time (?)
  11. 11. 2010
  12. 12. 2010
  13. 13. 2010
  14. 14. 2010
  15. 15. 2010 Wage equation
  16. 16. 2010 Wage equation  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) ……….
  17. 17. 2010
  18. 18. 2010
  19. 19. 2010  Surprising that employment is not found to affect compensation – in contrast to most empirical studies
  20. 20. 2010  ”Compensation shocks lower employment growth, but regarding output and prices, the demand effect from higher wages seems to prevail and push up both.”
  21. 21. 2010 •Confidence bands in crises
  22. 22. 2010 •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. “
  23. 23. 2010 •Real compensation (?) and unemployment – two changes at the same time make it hard to interpret the results •How to interpret effect on unemployment?
  24. 24. 2010
  25. 25. 2010
  26. 26. 2010  “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.”
  27. 27. 2010 Producer prices - annual growth rates -6 -4 -2 0 2 4 6 8 10 United States 1 EU27 total 2 OECD total
  28. 28. 2010 Labour compensation – annual growth rates 0 1 2 3 4 5 6 7 8 United States EU27 total OECD total Euro area
  29. 29. 2010 Other evidence suggest that downward nominal wage rigidity is weaker (Holden & Wulfsberg, 2010)
  30. 30. 2010
  31. 31. 2010
  32. 32. 2010
  33. 33. 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
  34. 34. 2010
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