76 student economic review vo 4 no 1 1990 the labour market & welfare induced rigidities iniroduction as a small open economy with, therefore, in at least all traded sectors, a. Labor market flexibility what is 'labor market flexibility ' labor market flexibility refers to firms' ability under a jurisdiction's laws and regulations to make decisions regarding employees's hiring, firing, hours and working conditions.
Some of the workers searching for jobs end up being unemployed countries are similar except for frictions in their labor markets we study the interaction of labor market rigidities and trade impediments in shaping welfare, trade flows, productivity, price levels and unemployment rates. Variation in labour market frictions and the interactions between trade impediments and labour market rigidities generate rich patterns of unemployment for example, lower frictions in a country's labour markets do not ensure lower unemployment, and unemployment and welfare can both rise in response to a policy change.
Eﬀects of labor market frictions on trade ﬂows, productivity, welfare and unemployment we are particularly interested in the impact of a country’s labor market rigidities on its trade partner, and the diﬀerential impact of lower trade impediments on countries with diﬀerent labor marketrigidities. Real price rigidity can result from several factors first, firms with market power can raise their mark-ups to offset declines in marginal cost and maintain a high price: 380 search costs can contribute to real rigidities through thick market externalities a thick market has many buyers and sellers, so search costs are lower.
Has already been written on the effects of labour market rigidities on industrial employment in india, and there is a view that labour market rigidities are responsible for “jobless growth” in organized manufacturing and increasing use of contract and temporary workers. Market mechanism in the labour market and are responsible for unemployment this thesis seeks to determine the validity ofthe link between labour market rigidities and unemployment.