Shocks and Structural Breaks: Labor Market Reforms in the United Kingdom

30 Pages Posted: 15 Feb 2006  

Ramana Ramaswamy

International Monetary Fund (IMF) - Asia and Pacific Department

Eswar S. Prasad

Cornell University - Dyson School of Applied Economics and Management; Cornell University - Department of Economics; Brookings Institution; NBER; IZA Institute of Labor Economics

Date Written: November 1994

Abstract

This paper analyzes the effects of the labor market reforms launched in the early 1980s by the Conservative government led by Mrs. Thatcher. It is argued that the increase in the growth of labor productivity in manufacturing after 1980 as well as the improvement in the responsiveness of employment to variations in output can be largely attributed to the success of the reforms in reducing industrial disputes and removing a number of structural impediments in the labor market. However, the reforms did not succeed in moderating real wage growth or improving the tradeoff between wage inflation and unemployment. This is attributed to certain aspects of the wage bargaining system and the influence of relative wage norms in the process of wage determination.

JEL Classification: E0, J3, J5

Suggested Citation

Ramaswamy, Ramana and Prasad, Eswar S., Shocks and Structural Breaks: Labor Market Reforms in the United Kingdom (November 1994). IMF Working Paper, Vol. , pp. 1-30, 1994. Available at SSRN: https://ssrn.com/abstract=883911

Ramana Ramaswamy (Contact Author)

International Monetary Fund (IMF) - Asia and Pacific Department ( email )

700 19th Street NW
Washington, DC 20431
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Eswar S. Prasad

Cornell University - Dyson School of Applied Economics and Management ( email )

440 Warren Hall
Ithaca, NY 14853
United States

HOME PAGE: http://prasad.aem.cornell.edu

Cornell University - Department of Economics ( email )

414 Uris Hall
Ithaca, NY 14853-7601
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Brookings Institution ( email )

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Washington, DC 20036
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NBER ( email )

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IZA Institute of Labor Economics

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

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