International Economics and Economic Policy

, Volume 7, Issue 4, pp 391–409 | Cite as

Capital mobility and labor market volatility

Original Paper

Abstract

We used a dynamic two-country optimizing model featuring efficiency wages to analyze the implications of capital mobility for labor market volatility. Capital mobility magnifies the short-run effects of productivity shocks and monetary shocks on employment and the real wage, but dampens the medium-run effects. The overall effects of capital mobility on the volatility and the cyclical properties of employment and the real wage are moderate.

Keywords

Capital mobility Efficiency wages Labor market volatility 

JEL Classification

E44 F36 F41 

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Copyright information

© Springer-Verlag 2010

Authors and Affiliations

  1. 1.FEP, CEF.UPUniversity of PortoPortoPortugal
  2. 2.Department of EconomicsSaarland UniversitySaarbrueckenGermany

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