IDEAS home Printed from https://ideas.repec.org/p/zbw/kondp1/300.html
   My bibliography  Save this paper

The European unemployment problem in a globalized world: Wage rigidities, welfare and involuntary low-skilled labour unemployment

Author

Listed:
  • Hilgers, Bodo
  • Wacker, Ulrich

Abstract

In a general equilibrium model of a small open economy with a nontraded goods sector involuntary low-skilled labour unemployment is introduced by an exogenously given wage rate, orientating ourselves by what has been called in the literature the 'European scenario'. By the concept of constrained and unconstrained transfer and profit functions we analyse the impact of a change both in an exogenously given low-skilled labour wage rate and in terms-oftrade on employment and welfare. As a striking result we will show that an increase in the exogenously given wage does not necessarily imply the expected decrease in employment and welfare. Thus, it will become obvious that not the distortion as such is decisive but its general equilibrium effects. We will derive necessary and sufficient conditions for an increase in employment and welfare due to an increase in the exogenously given wage. For improvements in employment and welfare the direction of change in the nontraded goods price and, thus, the output effect shows to be the driving force in our model. A terms of trade improvement leads to an employment effect that can either be positive or negative. In consequence, a decrease in employment can go hand in hand with an increase in welfare. In the case of a terms-of-trade deterioration, welfare only increases if employment increases.

Suggested Citation

  • Hilgers, Bodo & Wacker, Ulrich, 1999. "The European unemployment problem in a globalized world: Wage rigidities, welfare and involuntary low-skilled labour unemployment," Discussion Papers, Series I 300, University of Konstanz, Department of Economics.
  • Handle: RePEc:zbw:kondp1:300
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/68922/1/685773787.pdf
    Download Restriction: no
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:kondp1:300. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/fwkonde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.