Fredrik Andersson

Prefekt Nationalekonomiska institutionen, Professor

A fundamental asymmetry of asymmetric shocks

Författare

Fredrik Andersson
R Forslid

Summary, in English

A simple N-country specific-factor-type model with imperfectly mobile labour is developed. It is shown that the effects of country-specific productivity shocks hitting a small country have fundamentally asymmetric effects: A positive shock will be accommodated by a moderate wage increase and sizeable in-migration, whereas a negative shock will be accommodated by a significant decrease in wages and moderate out-migration. It is argued that the results of the model are consistent with the recent Irish experience. The welfare effects of small economic fluctuations are also discussed. (C) 2002 Elsevier B.V. All rights reserved.

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