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Unemployment, Wage Push and the Labour Cost Competitiveness of Regions - The Case of Hungary, 1986-1996

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  • Gabor Kertesi

    (Labour Research Department, Institute of Economics, Hungarian Academy of Sciences)

  • Janos Kollo

    (Labour Research Department, Institute of Economics, Hungarian Academy of Sciences)

Abstract

The paper analyses regional relative wages using individual and firmlevel data from Hungary 1986-96. In regions hit hard by the transition shock labour costs fell substantially; the estimated elasticities of wages with respect to regional unemployment were in a range typical of mature market economies already in 1992-93. In later stages of the transition the hard-hit rural regions lost a large part of their cost advantage vis-ê-vis Budapest and the central agglomeration for reasons including spatial diseconomies and falling search activity among the registered unemployed. The paper argues that the time path observed in Hungary (a U-curve of relative labour costs in crisis-hit regions) may prevail in other economies calling the attention to the limits of wage flexibility as a cure to persistent regional crises.

Suggested Citation

  • Gabor Kertesi & Janos Kollo, 1999. "Unemployment, Wage Push and the Labour Cost Competitiveness of Regions - The Case of Hungary, 1986-1996," Budapest Working Papers on the Labour Market 9905, Institute of Economics, Centre for Economic and Regional Studies.
    • Handle: RePEc:has:bworkp:9905
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    File URL: http://www.econ.core.hu/doc/bwp/bwp/bwp995.pdf
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    References listed on IDEAS

    as
    1. Kollo'', Janos & Nagy, Gyula, 1996. "Earnings gains and losses from insured unemployment in Hungary," Labour Economics, Elsevier, vol. 3(3), pages 279-298, October.
    2. Halpern,László & Wyplosz,Charles (ed.), 1998. "Hungary: Towards a Market Economy," Cambridge Books, Cambridge University Press, number 9780521630689, January.
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    Cited by:

    1. David G. Blanchflower & Andrew J. Oswald, 2005. "The Wage Curve Reloaded," NBER Working Papers 11338, National Bureau of Economic Research, Inc.
    2. Janos Kollő & Tomasz Mickiewicz, 2005. "Wage Bargaining, Privatisation, Ability to Pay and Outside Options: Evidence from Hungary," Post-Communist Economies, Taylor & Francis Journals, vol. 17(4), pages 465-483.
    3. Attila Csajbók (ed.) & Ágnes Csermely (ed.), 2002. "Adopting the euro in Hungary: expected costs, benefits and timing," MNB Occasional Papers 2002/24, Magyar Nemzeti Bank (Central Bank of Hungary).
    4. Iara, Anna & Traistaru, Iulia, 2004. "How flexible are wages in EU accession countries?," Labour Economics, Elsevier, vol. 11(4), pages 431-450, August.
    5. International Monetary Fund, 2004. "Czech Republic: Selected Issues," IMF Staff Country Reports 2004/265, International Monetary Fund.
    6. Karoly Fazekas, 2000. "The impact of foreign direct investment inflows on regional labour markets in Hungary," Budapest Working Papers on the Labour Market 0008, Institute of Economics, Centre for Economic and Regional Studies.
    7. Thiess Büttner & Vera Gács & Peter Huber & Anna Iara & Iulia Traistaru & Guntram Wolff, 2003. "Adjustment Capability of Regional Labour Markets," WIFO Studies, WIFO, number 24616.

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