The rapid wage increases observed in Eastern Germany over the past two years have important implications for the direction taken by structural change in this region. These implications are not solely negative, and remain controversial in the public debate. This paper discusses four aspects of a...

After unification, real wages in Eastern Germany rose rapidly relative to labour productivity despite high and rising levels of unemployment. This substantial increase in wage levels relative to those in Western Germany is difficult to explain without recourse to models of union behaviour or...

Widespread concern over real effects of EMU is consistent with new Keynesian approaches to macroeconomic fluctuations, but more difficult to reconcile with a real business cycle (RBC) paradigm. Using a model with frictions as a point of departure, I speculate that nominal price rigidity in...

A matching function approach is applied to unemployment exit data from a panel of Eastern German labour office districts since monetary union. With comparable West German data, such a matching function exhibits constant returns, is stable, and can account for at least three-quarters of the...

The increase in dispersion of regional unemployment in the Czech Republic, despite low overall joblessness, is suggestive of low labour mobility. At the same time, standard matching functions estimated with district level panel data exhibit spatial instability. A simple model of non-sequential...

The need for locational competition among labour markets arises when labour is immobile. At the same time market clearing under such conditions can lead to wage and income variability. In such cases demand for insurance against regional shocks arises, which can be provided by nationwide...

Existing theories of unions emphasize their impact on wage levels relative to the opportunity cost of leisure. This paper explores the possibility that monopoly unions provide income insurance against idiosyncratic wage variability. An optimal union contract is characterized by real wage and...

This paper surveys the emerging labour markets of the transforming economies of Central and Eastern Europe. Pissarides's model of equilibrium unemployment highlights the dynamics of labour markets as an important factor in the transformation, and labour market institutions will determine the...

Despite the impression of Eurosclerosis, labour markets in Europe are in fact quite active. Flows into and out of unemployment are large, countercyclical, and highly coincident in the four European countries examined in this paper. The most surprising finding is that exits from unemployment...

This paper investigates the effect of displacement on wages of socially insured German workers, who became unemployed in 1986. Because detailed information on job loss is unavailable, displacement status is predicted using a probit, estimated on the German Socioeconomic Panel. In contrast to US...