Employment, exchange rates and labour market rigidity

Arbeitspapier

There is increasing evidence that the interaction between shocks and labour market institutions is crucial to understanding the dynamics of employment. In this paper, we show that the inclusion of labour adjustment costs in a trade model affects the impact of exchange rate movements on employment. We also explore how labour market rigidities interact with the degree of exposure to international competition and with the technology level. Our model-based predictions are consistent with estimates obtained using panel data for 23 OECD countries. Namely, our estimates suggest that employment in low-technology sectors that have a very high degree of openness to trade and are located in countries with more flexible labour markets are more sensitive to exchange rate changes. Our model and estimates therefore provide additional evidence on the importance of interacting external shocks and labour market institutions.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 4891

Classification and Topics

• Classification: Wirtschaft ; Labor Demand ; Trade and Labor Market Interactions ; Open Economy Macroeconomics
• Subject: Exchange rates ; international trade ; job flows ; employment protection ; Wechselkurs ; Schock ; Arbeitsmarktflexibilisierung ; Beschäftigungseffekt ; Internationaler Wettbewerb ; Hochtechnologiesektor ; Low-Tech ; Theorie ; Schätzung ; OECD-Staaten

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Alexandre, Fernando ; Bação, Pedro ; Cerejeira, João ; Portela, Miguel
• Event: Veröffentlichung
• (who): Institute for the Study of Labor (IZA)
• (where): Bonn
• (when): 2010

Further information

• Handle: http://hdl.handle.net/10419/36895
• Last update: 10.03.2025, 11:45 AM CET