OCA and Labour markets

What is an asymmetric shock

when two countries in a union experience shocks to demand or supply in opposite directions

what are the criteria for OCA

• labour market mobility

• openess

• buisness cycle similarity

• homogenous policy prefrences

Possible causes for unemployment in simple model

• Employment Protection

• Geographical Unemployment

• Labour Hysteresis

• Occupational Unemployment

what patters of labour were observed in 2008

• transitory unemployment

• continuous rises in unemployment

• Double dip patters

What are double dip patterns

initial rise then fall then rise again of unemployment

what is labour hysterisis

periods of unemployment lead to a permanent rise in the natural rate of unemployment due to workers losing skills or motivation

What is transitory unemployment

temporary unemployment between jobs

What is a beveridge curve

curve drawn to show the inverse relationship between unemployment and job vacancies

What are the economic effects of trade integration

• leads to labour market integration due to competition from goods market

• creates winners and losers

what happens to wages in trade integration

• wages in industries that expand rise

• wages in industries that shrink fall

• inter industry migration means wages equalize in long term

Assumptions in models of migration

• capital fixed labour flexible owners of capital demand labour

• two countries north and south

• all workers same skill

Is there evidence for negative effect on wages for migration

no

What about emigration

• Brian Drain is a real phenomenon with evidence

• decreased wages and worse wage inequality

What are double dip patterns

secondary rise in unemployment due to a further crisis after the initial ones

5 main causes of divergent unemployment across EU

• financial liquidity constraints

• Austerity Measures

• Shocks

• Falling productivity

• Institutions

How and Where did financial liquidity cause unemployment

• banks fail and can’t lend to buisness

• Buisness then went bankrupt

• laid off workers

• Greece Spain portugal

How and Where did Austerity have an effect

• Greece’s sharp cuts to government paychecks

• Lower spending in the economy

How did lower productivity effect unemployment

• harder for buisnesses to compete they go out of buisness

• Workers laid off

• Long term Structural Unemployment

How did institutions play a role

• Lack of retraining of employees

• Lack of policies to address labour Hysterisis

How did Beveridge curve change EU

shifted outward lower match efficiency

What is common shock, asymmetric shock

same shock different levels of impact