What is it about?
At the domestic level labor markets in emerging economies are associated with volatile (real) wages and not so volatile employment. At the international level, (real) exchange rates are highly volatile, and consumption risk is higher in emerging economies. In challenge to a conventional assumption in the existing literature, I explain these observations based on the relative importance of strong (instead of weak) wealth effects on labor supply on emerging economies.
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Why is it important?
Our theoretical finding is suggestive of the notion that the effect of wealth on emerging market households is more important for labor market outcomes than previously acknowledged.
Perspectives
Although theoretical, the novelty of this article is to highlight the importance of wealth effects in labor market outcomes for emerging market economies. Policy makers should therefore be cognizant about this important features of the domestic labor market.
Carlos Yepez
University of Manitoba
Read the Original
This page is a summary of: Cyclical wage movements in emerging markets compared to developed economies: a general equilibrium comment, Journal of International Trade & Economic Development, January 2018, Taylor & Francis,
DOI: 10.1080/09638199.2017.1416661.
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