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How Are Product Demand Changes Transmitted to the Labour Market?

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  • Lindbeck, Assar
  • Snower, Dennis J

Abstract

In the traditional Keynesian and classical models, the transmission of product demand changes to the labor market generally involves wage-price sluggishness or countercyclical real wage movements. In practice, however, real wages are often acyclical or procyclical, and wages and prices are flexible over periods of several years. This paper examines the main channels whereby product demand can affect employment under these conditions. The analysis suggests that the effectiveness of demand management policies under wage-price flexibility depends significantly on the availability of a limited number of supply-side transmission channels. Copyright 1994 by Royal Economic Society.

Suggested Citation

  • Lindbeck, Assar & Snower, Dennis J, 1994. "How Are Product Demand Changes Transmitted to the Labour Market?," Economic Journal, Royal Economic Society, vol. 104(423), pages 386-398, March.
    • Handle: RePEc:ecj:econjl:v:104:y:1994:i:423:p:386-98
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    Cited by:

    1. Agnese, Pablo & Hector, Sala, 2008. "Unemployment in Japan: A look at the ‘lost decade’," MPRA Paper 14332, University Library of Munich, Germany.
    2. Assar Lindbeck & Dennis J. Snower, 2001. "Insiders versus Outsiders," Journal of Economic Perspectives, American Economic Association, vol. 15(1), pages 165-188, Winter.
    3. Karanassou, Marika & Sala, Hector & Snower, Dennis J., 2008. "Long-run inflation-unemployment dynamics: The Spanish Phillips curve and economic policy," Journal of Policy Modeling, Elsevier, vol. 30(2), pages 279-300.
    4. Marika Karanassou & Hector Sala, 2010. "Labour Market Dynamics in Australia: What Drives Unemployment?," The Economic Record, The Economic Society of Australia, vol. 86(273), pages 185-209, June.
    5. Roberto Bande & Marika Karanassou & Héctor Sala, 2019. "Employment in Spanish regions: cost-control or growth-enhancing policies?," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 62(3), pages 601-635, June.
    6. Jakob Madsen & Richard Damania, 2001. "Labour Demand and Wage-induced Innovations: Evidence from the OECD countries," International Review of Applied Economics, Taylor & Francis Journals, vol. 15(3), pages 323-334.
    7. Adriana D. Kugler & Giovanni Pica, 2006. "The Effects of Employment Protection and Product Market Regulations on the Italian Labour Market," Chapters, in: Julián Messina & Claudio Michelacci & Jarkko Turunen & Gylfi Zoega (ed.), Labour Market Adjustments in Europe, chapter 4, Edward Elgar Publishing.
    8. Karanassou, Marika & Snower, Dennis J., 2000. "Characteristics of Unemployment Dynamics: The Chain Reaction Approach," IZA Discussion Papers 127, Institute of Labor Economics (IZA).
    9. Franz, Wolfgang, 1995. "Theoretische Ansätze zur Erklärung der Arbeitslosigkeit: Wo stehen wir 1995?," Discussion Papers 27, University of Konstanz, Center for International Labor Economics (CILE).
    10. Karanassou, Marika & Sala, Hector & Snower, Dennis J., 2008. "Long-run inflation-unemployment dynamics: The Spanish Phillips curve and economic policy," Journal of Policy Modeling, Elsevier, vol. 30(2), pages 279-300.
    11. Snower, Dennis & Karanassou, Marika & Sala, Hector, 2003. "The European Phillips Curve: Does the NAIRU Exist?," CEPR Discussion Papers 4102, C.E.P.R. Discussion Papers.
    12. Roberto BANDE & Dolores RIVEIRO, 2013. "The Consumption-Investment-Unemployment Relationship In Spain: An Analysis With Regional Data," Theoretical and Practical Research in the Economic Fields, ASERS Publishing, vol. 4(1), pages 5-24.
    13. Hsun Chu & Ching-Chong Lai & Chu-Chuan Cheng, 2015. "Tax Havens, Growth, and Welfare," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 17(6), pages 802-823, December.
    14. Dennis J. Snower, 1993. "Insider-Outsider-Beziehungen und Einkommensverteilung," Wirtschaft und Gesellschaft - WuG, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik, vol. 19(4), pages 461-469.
    15. Pichelmann, Karl & Schuh, Andreas-Ulrich, 1996. "The NAIRU - Concept: A Few Remarks," Economics Series 36, Institute for Advanced Studies.
    16. Lindbeck, Assar & Snower, Dennis J., 2002. "The Insider-Outsider Theory: A Survey," IZA Discussion Papers 534, Institute of Labor Economics (IZA).
    17. Marika Karanassou & Hector Sala, 2010. "Labour Market Dynamics in Australia: What Drives Unemployment?," The Economic Record, The Economic Society of Australia, vol. 86(273), pages 185-209, June.
    18. Doucouliagos, Chris, 1997. "The Aggregate Demand for Labour in Australia: A Meta-analysis," Australian Economic Papers, Wiley Blackwell, vol. 36(69), pages 224-242, December.
    19. repec:clr:wugarc:y:1993:v:19i:4p:461 is not listed on IDEAS
    20. Stolzenburg, Ulrich, 2015. "The agent-based Solow growth model with endogenous business cycles," Economics Working Papers 2015-01, Christian-Albrechts-University of Kiel, Department of Economics.
    21. Corrado Benassi & Roberto Cellini & Alessandra Chirco, 1999. "Market power under income polarization," Journal of Economics, Springer, vol. 69(3), pages 289-298, October.

    More about this item

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J4 - Labor and Demographic Economics - - Particular Labor Markets
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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