Are wages equal across sectors of production?

Schmillen, Achim

doi:10.1111/ecot.12025

Econ Transit

2013

DOI: 10.1111/ecot.12025

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Are wages equal across sectors of production?

Achim Schmillen

Abstract: The assumption that national labour markets are homogeneous across tradable and non-tradable goods is common in multisector (open-economy) macro models and crucial for the prominent Balassa-Samuelson hypothesis. To test it, this study introduces a novel, theory-based method of distinguishing the tradable and non-tradable sectors to the Balassa-Samuelson literature and employs modern empirical methods and a large and detailed macro dataset. It finds that both the internal relationship between productivity and w… Show more

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Cited by 9 publications

(1 citation statement)

References 56 publications

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“… Schmillen () offers in a cross‐section basis, empirical evidence on labor markets heterogeneity between the tradable and the nontradable sectors.…”

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confidence: 99%

Overborrowing and Balance of Payments Imbalances in a Monetary Union

2015

Rev International Economics

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The sources of the balance of payments imbalances in the Euro area can be characterized by a combination of four phenomena: (i) the credit imbalances between the core and the periphery of the Economic and Monetary Union (EMU) (ii) the credit misallocation between the tradable and the nontradable sectors in the periphery (iii) the rapid increase in the output and the price of nontradable goods in the periphery since the beginning of the EMU and (iv) the current account imbalances within the EMU. This paper explains all four of these stylized facts within a single model as a result of the interaction between the common monetary policy, inflation heterogeneity and a relaxation of the credit constraint in the nontradable sector of the periphery. When nontradable goods are used as collateral, an increase in their prices can initiate an overborrowing spiral and lead to a balance of payment imbalances. Furthermore, the model endogenizes differences in unit labor costs between the core and the periphery of the Euro area.

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“… Schmillen () offers in a cross‐section basis, empirical evidence on labor markets heterogeneity between the tradable and the nontradable sectors.…”

mentioning

confidence: 99%

Overborrowing and Balance of Payments Imbalances in a Monetary Union

2015

Rev International Economics

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The role of intellectual property rights in a directed technical change model

Afonso

Magalhäes

2020

Int. J Fin Econ

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We propose a two country, Innovator and Follower, directed technical change model between tradable and nontradable sectors. The Innovator performs innovative R&D and the Follower adopts the available technological knowledge. Substitutability between sectors, scale effects, international IPRs protection and R&D productivity determine the economic growth and the technological‐knowledge bias, which, in turn, affects relative prices and wages. Wages are higher in the Innovator, namely in the nontradable sector under strong substitutability. Technological‐knowledge and intra‐country wage inequality are biassed towards the tradable sector, the effect being reinforced by positive IPRs protection and substitutability. Real exchange rates accommodate the Balassa‐Samuelson proposal and increase with positive IPRs protection and substitutability. The effect of IPRs on the steady‐state growth rate is ambiguous, depending on the substitutability. Theoretical results are also influenced by labor movements and are confirmed by a calibrated exercise for 11 developed/Innovator countries and 11 developing/Follower countries, and by the empirical evidence.

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Labour Market Fluctuations and the Housing Net Worth Channel in the EU

Cronin

McQuinn

2022

De Economist

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The credit-driven housing net worth channel has been identified as a determinant of the sharp drop in US employment between 2007 and 2009. We examine the impact of this channel on the labour market in Europe using panel data for 20 countries covering the period 1996 to 2017. This period saw substantial changes in both credit provision and labour market performance in the EU. While some of our results are similar to those found in analysis of the US labour market, there are also important differences. For the full panel, we find changes in housing net worth having a significant effect on total employment and its non-traded and traded sector components, with a larger effect in the non-traded sector. Further estimations show that these significant effects on employment pertain to the post-2007 era when credit conditions were considerably more restrictive. In contrast to the US evidence, we find significant wage responses to housing net worth shocks arising in the EU.

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Are wages equal across sectors of production?

Cited by 9 publications

References 56 publications

Overborrowing and Balance of Payments Imbalances in a Monetary Union

Overborrowing and Balance of Payments Imbalances in a Monetary Union

The role of intellectual property rights in a directed technical change model

Labour Market Fluctuations and the Housing Net Worth Channel in the EU

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