Labour Market Flexibility, Productivity and Employment
Speaker
Abstract
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Our results cast doubt about the desirability of wage-cost saving deregulation of labour markets. The economics mainstream strongly argues that high European unemployment should be reduced by making labour markets more flexible. Especially wages should be made (downwardly) flexible. Behind such arguments is the (implicit) assumption that lower wages will favour job creation while not influencing labour productivity. We show that there are significant feedback mechanisms from, on the one hand, changes in wages and in levels of labour shares in national income and, on the other hand, growth rates of labour productivity. Besides, our results raise doubt about the relevance of the well-known Verdoorn-Kaldor law. |
| Contact information: |
| Patricia de Wilde |
Coordinator
