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Where do real wage policies lead Belgium: a general equilibrium analysis

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  • Simon Erlich
  • Victor Ginsburgh
  • Ludo Van der Heyden

Abstract

This paper is concerned with an application to Belgium of a two-period general equilibrium model; in the short run, market imperfections (like downward rigidities on real wages) may generate a temporary disequilibrium; in the long run, flexible prices and substitution between factors restore equilibrium on all markets. The ‘dynamic’ structure is thus actually meant to represent a short-run disequilibrium embedded in a long-run equilibrium, and only the short-run results are of real interest, but with a theoretically sound long-run analysis as a background. We show that in the short run, real wage policies can only do very little to alleviate the burden of unemployment. They however have strong effects in the medium and the long run, provided that they are supported by fairly large capacity increases. © 1987, All rights reserved.

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  • Simon Erlich & Victor Ginsburgh & Ludo Van der Heyden, 1987. "Where do real wage policies lead Belgium: a general equilibrium analysis," ULB Institutional Repository 2013/1747, ULB -- Universite Libre de Bruxelles.
    • Handle: RePEc:ulb:ulbeco:2013/1747
    Note: SCOPUS: ar.j
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    Cited by:

    1. Ginsburgh, V.A. & Sneessens, H.R., 1989. "Structural Shocks And Investment Subsidies In An Overlapping Generations Model With Perfect Foresight," G.R.E.Q.A.M. 89a13, Universite Aix-Marseille III.
    2. Mercenier, Jean, 1995. "Can "1992" reduce unemployment in Europe? On welfare and employment effects of Europe's move to a single market," Journal of Policy Modeling, Elsevier, vol. 17(1), pages 1-37, February.
    3. Pierre-Yves Letournel & Katheline Schubert & Philippe Trainar, 1992. "L'utilisation des modèles d'équilibre général calculables dans l'évaluation de la politique fiscale," Revue Économique, Programme National Persée, vol. 43(4), pages 709-724.

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