The Rise and Fall of Swiss Unemployment: Relative Demand Shocks, Wage Rigidities, and Temporary Immigrants

66 Pages Posted: 7 Feb 2003

See all articles by Patrick A. Puhani

Patrick A. Puhani

Leibniz Universität Hannover; University of St. Gallen - Swiss Institute for International Economics and Applied Economic Research; IZA Institute of Labor Economics; Université Paris II - Panthéon-Assas

Date Written: January 2003

Abstract

Switzerland, traditionally a "zero unemployment" economy, has seen an unprecedented rise in joblessness in the 1990s although unemployment fell again to a rather low level after 1997. This paper tests whether Switzerland experienced a negative relative net demand shock against the low skilled (like the US) during this period. It turns out that only workers with an educational level below apprenticeship were affected by such a shock. Furthermore, I test whether wages reacted flexibly to this shock and find that they were rigid, which can explain the relative unemployment increase for this group. Finally, I test whether the skill mix of temporary immigrants was adjusted to the relative demand shock. The evidence suggests that it was changed during the period around 1997 when unemployment peaked. By 2001, however, the educational mix of temporary immigrants was not significantly different from its 1991 level any more, although relative unemployment for the least skilled was still relatively high in face of the relative wage rigidity affecting this group.

Keywords: Earnings, Non-employment, Rigidity, Identification, Foreigners, Work Permits

JEL Classification: E24, J21, J31, J64

Suggested Citation

Puhani, Patrick A., The Rise and Fall of Swiss Unemployment: Relative Demand Shocks, Wage Rigidities, and Temporary Immigrants (January 2003). Available at SSRN: https://ssrn.com/abstract=372505 or http://dx.doi.org/10.2139/ssrn.372505

Patrick A. Puhani (Contact Author)

Leibniz Universität Hannover ( email )

Institut für Arbeitsökonomik
Koenigsworther Platz 1
30167 Hannover, DE 30167
Germany

University of St. Gallen - Swiss Institute for International Economics and Applied Economic Research ( email )

Dufourstr. 48
St. Gallen, 9000
Switzerland
+41 71 224 2341 (Phone)
+41 71 224 2298 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Université Paris II - Panthéon-Assas

12 place du Pantheon
Paris cedex 06, 75231
France

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