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Real Wages, Quantity Constraints and Equilibrium Unemployment : Belgium 1955-1988

Author

Listed:
  • Lubrano, Michel

    (GREQE, EHSS; Université d’Aix-Marseille)

  • Shadman-Mehta, Fatemeh

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))

  • Sneessens, Henri R.

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES); Faculté Libre de Sciences Economiques, Lille)

Abstract

This paper examines the determinants of equilibrium wage and unemployment rates in Belgium within the framework of a quantity rationing, right-to-manage model with decentralised wage setting. Empirical results are obtained by first using the Johansen maximum-likelihood procedure for the analysis of cointegration among the variables of interest. The information from this stage is then used to estimate a three-equation econometric model explaining the wage share, the unemployment rate and the capital gap. The slowdown in world trade is depicted as the most important factor explaining the rise in unemployment in Belgium, with dampening effects due to wage control policies imposed in the eighties. Because we obtain only two cointegrating relations, for three endogenous variables, our results are compatible with the hypothesis of path dependency and multiple equilibria.

Suggested Citation

  • Lubrano, Michel & Shadman-Mehta, Fatemeh & Sneessens, Henri R., 1993. "Real Wages, Quantity Constraints and Equilibrium Unemployment : Belgium 1955-1988," LIDAM Discussion Papers IRES 1993011, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    • Handle: RePEc:ctl:louvir:1993011
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    Cited by:

    1. Welfe, Aleksander, 1996. "The Price-Wage Inflationary Spiral in Poland," Economic Change and Restructuring, Springer, vol. 29(1), pages 33-50.
    2. Jacques Drèze, 2001. "On the Macroeconomics of Uncertainty and Incomplete Markets," International Economic Association Series, in: Jacques Drèze (ed.), Advances in Macroeconomic Theory, chapter 3, pages 30-55, Palgrave Macmillan.
    3. Welfe, Aleksander, 1994. "The price-wage inflationary spiral: The mixed economic case," Discussion Papers 13, University of Konstanz, Center for International Labor Economics (CILE).
    4. Mounfield, C.C. & Edwards, S.F., 1994. "A model for the packing of irregularly shaped grains," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 210(3), pages 301-316.

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    Keywords

    wages; unemployment;

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