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April 13, 2011



It is sometimes difficult to relocate even though the working conditions and wages may be attractive. It's a step that has to be thought about carefully.


Dsquared is rather good on this here:



But surely no macro theory of productivity in recessions was ever completely without a micro foundation? The idea of labour hoarding is a micro foundation (or at least is if the idea of sectoral shifts is).

Luis Enrique

is this a point against "macroeconomics" or merely an illustration of the point that to think about certain questions, you need to think about multiple sectors and reallocations therein. Something which is hardly alien to macroeconomics, including thinking about how aggregate TFP statistics are affected by shifts between sectors.

Ralph Musgrave

To discard macro altogether would be to throw a baby out with the bathwater. If we discarded it, people would then start applying the laws of micro at the macro economic level, which leads to a number of well known economic howlers. A classic one is that at the micro level, dropping the price of a particular type of labour leads raised employment levels for that type of labour. Prior to Keynes many folk assumed that if the price of ALL labour was reduced, that would raise aggregate employment levels. Problem is, of course, that wages are the main constituent of aggregate demand. So, cut wages and demand declines, which, far from raising aggregate employment levels might actually REDUCE employment overall.

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