Steinar Holden Department of Economics, University of Oslo folk.uio.no/sholden
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Transcript of Steinar Holden Department of Economics, University of Oslo folk.uio.no/sholden
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2010
Discussion of:
Labour markets during recessions – evidence on the role of wage rigidity and
hysteresisby Juha Kilponen, David Lodge, Rolf Strauch and Juuso Vanhala
Steinar HoldenDepartment of Economics, University of Oslo
http://folk.uio.no/sholden/Workshop in Sveriges Riksbank
2 September 2010
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Research questions
How does the labour market react during financial crises and other downturns?
Are labour market reactions to financial crises systematically different from normal downturns?
Unemployment, employment and outputHysteresis and long-term unemployment
Wages and wage rigidityEmployment and output effects
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Overall evaluation
Lots of interesting charts and empirical analyses
Cover a broad range of important issues Provides a useful overview of labour
market reactions in downturns
Does not ”dig deep” on any specific issueOften low statistical significanceLittle analysis of heterogeneity and mechanisms
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Business cycle dating
”Throughs and peaks – any quarter lower or higher than the preceding and succeeding two quarters”
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Business cycle dating
”Throughs and peaks – any quarter lower or higher than the preceding and succeeding two quarters”
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Unemployment rates Nordic countries
1981
1982
1983
1984
1985
1986
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FinlandNorwaySweden
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Unemployment rates Nordic countries
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
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1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
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16
18
FinlandNorwaySweden
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Unemployment rates Nordic countries
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
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FinlandNorwaySweden
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Unemployment rates Nordic countries
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
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FinlandNorwaySweden
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Productivity growth reduces cost – but not this time (?)
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Wage equation
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Wage equation
No wage share term – in contrast to theory and to a wealth of evidence on time series and panel data
Blanchflower & Oswald (1994), Nymoen & Rødseth (2003), Holden & Nymoen (2002), Forslund, Gottfries & Westermark (2008), Bårdsen & Nymoen (2009) ……….
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Surprising that employment is not found to affect compensation – in contrast to most empirical studies
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”Compensation shocks lower employment growth, but regarding output and prices, the demand effect from higher wages seems to prevail and push up both.”
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• Confidence bands in crises
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• Confidence bands in crises• “The impact on nominal growth rates however exceeds the output
effect. As a result, employment growth drops remarkably and eventually turns negative. “
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• Real compensation (?) and unemployment – two changes at the same time make it hard to interpret the results• How to interpret effect on unemployment?
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“At the same time, note that there are several countries where the real product wage had fallen below 2008Q1 level already prior to 2009Q1. This is in contrast to the ERM II crisis, where the real wage shows far more inertia. In fact, the real wage shows a countercyclical pattern in the large majority of the countries during the ERM II crisis. This leads us to conjecture that nominal wage inertia is less prevalent during the current crisis.”
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Producer prices - annual growth rates
1983
1984
1985
1986
1987
1988
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1991
1992
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1999
2000
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2010q2
-6
-4
-2
0
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6
8
10
United States 1EU27 total 2OECD total
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Labour compensation – annual growth rates
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1
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United StatesEU27 totalOECD totalEuro area
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2010Other evidence suggest that downward nominal wage rigidity is weaker
(Holden & Wulfsberg, 2010)
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Summing up
Lots of interesting charts and empirical analyses
Cover a broad range of important issues Provides a useful overview of labour
market reactions in downturns
Does not ”dig deep” on any specific issueOften low statistical significanceLittle analysis of heterogeneity and mechanisms
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2010