Efficiency Wages and Labor Mobility in an Open Economy

40 Pages Posted: 15 Feb 2006

See all articles by Pierre-Richard Agenor

Pierre-Richard Agenor

University of Manchester - School of Social Sciences

Julio A. Santaella

Instituto Tecnológico Autónomo de México (ITAM)

Date Written: October 1993

Abstract

The paper analyzes the role of labor market segmentation and relative wage rigidity in the transmission process of macroeconomic shocks in a two-sector optimizing model of a small open economy. The analysis is first conducted in the context of perfect intersectoral labor mobility. The discussion is then extended to consider the existence of short-run constraints on labor movements. The results highlight the role of efficiency considerations in the behavior of sectoral wages. A deflationary policy induces a reallocation of labor across sectors, but has no long-run effect on the unemployment rate.

JEL Classification: E24, J23, J42

Suggested Citation

Agenor, Pierre-Richard and Santaella, Julio A., Efficiency Wages and Labor Mobility in an Open Economy (October 1993). IMF Working Paper, Vol. , pp. 1-40, 1993. Available at SSRN: https://ssrn.com/abstract=883802

Pierre-Richard Agenor (Contact Author)

University of Manchester - School of Social Sciences ( email )

Oxford Road
Manchester, M13 9PL
United Kingdom

Julio A. Santaella

Instituto Tecnológico Autónomo de México (ITAM) ( email )

Rio Hondo No.1 Col. Tizapan-San Angel
del Centro de Economia Aplicada
01000 Mexico, D.F
Mexico
5628-4193 (Phone)
5628-4058 (Fax)

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