The high vacancy posting in the non-tradable sector, coupled with the rise in the disutility of working in the tradable sector, moves unemployed workers from the tradable to the non-tradable sector, explaining the bulk of the increase in the share of non-tradable em- ployment over time, and decreasing aggregate unemployment despite upward pressure associated with the Dutch Disease. [...] Equation (37) shows that the wage in sector j is within the bargaining set of the maximum the firm will offer, represented by the marginal product of labor plus the forgone costs of hiring (the term multiplied by Ωj on the RHS of the equation), and the minimum the worker will accept, represented by the disutility of being employed in the sector net of the expected differential benefit of transitio. [...] Overall, the movements in the disutility of working are powerful in explaining the bulk of the increase in the share of non-tradable employment, while they generate a counterfactual fall in the share of non-tradable consumption and have no power in explaining the changes in the real exchange rate and net exports. [...] The concomitant increase in the price and the demand of non-tradable goods lead to a raise in the share of non-tradable consumption, while the same wage raise in the non-tradable sector dampens the expansion of employment in the non-tradable sector, as can be seen by the mild increase of the non-tradable employment share that re- mains greatly lower than the observed increase. [...] In addition, the sectoral change also alters the percentage response of the economy from the steady state, increasing the reaction of the variables whose steady state has diminished (i.e., the tradable sector).28 Our numerical simulations show that the large fall in employment in the contracted tradable sector out- weighs the rise in employment in the expanded non-tradable sector, leading to the s.
- Pages
- 82
- Published in
- Japan
