Unemployment rates in Austria are traditionally lower than in most other OECD countries (see, e.g. OECD, 2010, for the latest rates), although unemployment of low qualified Austrians has recently been strongly increasing.
For example, the rate among men having completed only compulsory education increased from 7.2% in autumn 2008 to 12.5% a year later. For low-qualified women, the rate increased from 8.6% to 10.4% in the same period (Statistik Austria, 2009).
Recent events emphasize the growing interdependence between government policy and international financial markets. The shifting patterns of ownership of firm permitted through international trade in equities alter the coalitions in support of particular policies and thereby change the nature of government intervention. This paper focuses specifically on the influence of international financial markets on the use of strategic trade policies.
The current theoretical analysis of labor market search and matching is dominated by two rather separate literatures. In the first of these one typically assumes firm wage posting. Wage dispersion may then result from either on-the-job worker search (Burdett and Mortensen (1998), Burdett and Coles (2003)), or from nonsequential search whereby workers find it advantageous to search for more than one firm simultaneously. Wilde (1977) and Burdett and Judd (1983) provide product market applications of the latter type of models; more recently, Acemoglu and Shimer (2000) (hereafter AS) and Mortensen (1998) have studied labor market applications. In AS, wage dispersion among identical workers can result from firms’ endogenous capital choices, whereby some firms invest more capital than others, and offer a higher wage, in return for greater probability of employing a worker.
The other main branch of this literature assumes bilateral matching and bargaining between individual firms and workers, and builds on the work of Mortensen and Pissarides and followers (e.g. Mortensen and Pissarides (1999), Pissarides (2000); see also Acemoglu and Shimer (1999)). This model framework assumes continuous time, unlimited decision horizon and sequential search. Firms’ capital choices and wages are here typically identical.
