1. 2010 Discussion of: Labour markets during recessions – evidence on the role of wage rigidity and hysteresis by Juha Kilponen, David Lodge, Rolf Strauch and Juuso Vanhala Steinar Holden Department of Economics, University of Oslo http://folk.uio.no/sholden/ Workshop in Sveriges Riksbank 2 September 2010

2. 2010 Research questions How does the labour market react during financial crises and other downturns? Are labour market reactions to financial crises systematically different from normal downturns? Unemployment, employment and output Hysteresis and long-term unemployment Wages and wage rigidity Employment and output effects

3. 2010 Overall evaluation Lots of interesting charts and empirical analyses Cover a broad range of important issues Provides a useful overview of labour market reactions in downturns Does not ”dig deep” on any specific issue Often low statistical significance Little analysis of heterogeneity and mechanisms

4. 2010 Business cycle dating ”Throughs and peaks – any quarter lower or higher than the preceding and succeeding two quarters”

5. 2010 Business cycle dating ”Throughs and peaks – any quarter lower or higher than the preceding and succeeding two quarters”

6. 2010 Unemployment rates Nordic countries

7. 2010 Unemployment rates Nordic countries

8. 2010 Unemployment rates Nordic countries

9. 2010 Unemployment rates Nordic countries

10. 2010 Productivity growth reduces cost – but not this time (?)

11. 2010

15. Wage equation

16. 2010 Wage equation No wage share term – in contrast to theory and to a wealth of evidence on time series and panel data Blanchflower & Oswald (1994), Nymoen & Rødseth (2003), Holden & Nymoen (2002), Forslund, Gottfries & Westermark (2008), Bårdsen & Nymoen (2009) ……….

17. 2010

19. Surprising that employment is not found to affect compensation – in contrast to most empirical studies

20. 2010 ”Compensation shocks lower employment growth, but regarding output and prices, the demand effect from higher wages seems to prevail and push up both.”

21. 2010 Confidence bands in crises

22. 2010 Confidence bands in crises “The impact on nominal growth rates however exceeds the output effect. As a result, employment growth drops remarkably and eventually turns negative. “

23. 2010 Real compensation (?) and unemployment – two changes at the same time make it hard to interpret the results How to interpret effect on unemployment?

24. 2010

26. “At the same time, note that there are several countries where the real product wage had fallen below 2008Q1 level already prior to 2009Q1. This is in contrast to the ERM II crisis, where the real wage shows far more inertia. In fact, the real wage shows a countercyclical pattern in the large majority of the countries during the ERM II crisis. This leads us to conjecture that nominal wage inertia is less prevalent during the current crisis.”

27. 2010 Producer prices - annual growth rates

28. 2010 Labour compensation – annual growth rates

29. 2010 Other evidence suggest that downward nominal wage rigidity is weaker (Holden & Wulfsberg, 2010)

30. 2010

33. Summing up Lots of interesting charts and empirical analyses Cover a broad range of important issues Provides a useful overview of labour market reactions in downturns Does not ”dig deep” on any specific issue Often low statistical significance Little analysis of heterogeneity and mechanisms

34. 2010