Relative Price Changes, Wages and Unemployment in a Specific Factors Model with Search Frictions

11 Pages Posted: 15 Jan 2007

See all articles by Klaus Wälde

Klaus Wälde

University of Mainz; CESifo (Center for Economic Studies and Ifo Institute); UCL at Louvain la Neuve

Pia Weiss

Nottingham University Business School

Abstract

This paper analyzes the effects of changes in the relative product price on wages and unemployment of a small open economy in a specific factors model characterized by search frictions. It shows that unemployment and wages move in opposite directions, i.e., high unemployment is associated with low wages and low unemployment with high wages. The reason for the employment effect is found to be individual wage bargaining.

Suggested Citation

Wälde, Klaus and Weiss, Pia, Relative Price Changes, Wages and Unemployment in a Specific Factors Model with Search Frictions. Review of Development Economics, Vol. 10, No. 3, pp. 400-410, August 2006, Available at SSRN: https://ssrn.com/abstract=920547 or http://dx.doi.org/10.1111/j.1467-9361.2006.00366.x

Klaus Wälde (Contact Author)

University of Mainz ( email )

Mainz School of Management and Economics
Mainz, 55128
Germany
+49 6131 3920143 (Phone)

HOME PAGE: http://www.waelde.com

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

UCL at Louvain la Neuve

Place Montesquieu, 3
Louvain-la-Neuve, 1348
Belgium

Pia Weiss

Nottingham University Business School ( email )

Jubilee Campus
Wollaton Road
Nottingham, NG8 1BB
United Kingdom

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