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Efficiency Wages and Labor Mobility in an Open Economy
Author:
Julio A. Santaella null

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Pierre-Richard Agénor null

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Series:
IMF Working Papers
Volume/Issue:
Volume 1993: Issue 079
Language:
English
Publication Date:
01 Oct 1993
DOI:
https://doi.org/10.5089/9781451850161.001
ISBN:
9781451850161
ISSN:
1018-5941
Pages:
40
Keywords:
WP
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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The paper analyzes the role of labor market segmentation and relative wage rigidity in the transmission process of macroeconomic shocks in a two-sector optimizing model of a small open economy. The analysis is first conducted in the context of perfect intersectoral labor mobility. The discussion is then extended to consider the existence of short-run constraints on labor movements. The results highlight the role of efficiency considerations in the behavior of sectoral wages. A deflationary policy induces a reallocation of labor across sectors, but has no long-run effect on the unemployment rate.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund