Abstract
This paper examines the determinants of equilibrium wage and unemployment rates in Belgium within the framework of a quantity rationing, right-to-manage model with decentralised wage-setting. Empirical results are obtained by first using the Johansen maximum-likelihood procedure for the analysis of cointegration among the variables of interest. The information from this stage is then used to estimate a three equation econometric model explaining the wage share, the unemployment rate and the capital gap. The slowdown in world trade is depicted as the most important factor explaining the rise in unemployment in Belgium, with dampening effects due to wage control policies imposed in the eighties. Because we obtain only two cointegrating relations, for three endogenous variables, our results are compatible with the hypothesis of path dependency and multiple equilibria.
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This text presents research results of the Belgian programme on Interuniversity Poles of Attraction initiated by the Belgian State, Prime Minister's Office, Science Policy Programming. The Scientific responsibility is assumed by its authors. Financial support from the European Commission under the SPES project is also gratefully acknowledged. We also wish to thank M. Bogaert and T. de Biolley at the Belgian Planning Bureau, for giving us most of the time series, as well as Luc Bauwens, D. F. Hendry, J-P Urbain, D. Weiserbs and an anonymous referee for many helpful comments that helped improve the final version.
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Lubrano, M., Shadman-Mehta, F. & Sneessens, H.R. Real wages, quantity constraints and equilibrium unemployment: Belgium, 1955–1988. Empirical Economics 21, 427–457 (1996). https://doi.org/10.1007/BF01179866
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DOI: https://doi.org/10.1007/BF01179866