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Spain versus Florida

Paul Krugman (2008ko Ekonomia Nobel Saria) 2009/12/18 The New York Times lotura

Hey, this discussion of wages and employment is turning into a sort of Chatauqua on macroeconomics! So, another entry.

In response to my post on Spain, and why it’s different from the United States, some commenters argued that individual US states or regions are in the same situation as Spain (or Ireland), so there really isn’t any difference.Shouldn’t Florida have its own currency? (I propose naming it the stucco).

Well, not quite. First of all, beware the fallacy of composition: any one US state could gain jobs by cutting wages, but if all of them do it, it’s a wash. But second, we have a different way to adjust to regional shocks: migration.

Actually, during the runup to the creation of the euro there was a very interesting academic literature comparing and contrasting the North American Monetary Union, also known as the United States, and the potential eurozone. Here’s one example.

Probably the most important contribution came from Blanchard and Katz, who showed that in the United States workers move fairly expeditiously from high- to low-unemployment states. As a result, a state hit by an adverse shock tends to return to the average national unemployment rate within about 6 years, even if it never regains the lost jobs.

Europe isn’t like that. The Single European Act offers freedom of movement, but the lack of a common language still poses major barriers, and proposals for a single language don’t seem to be making progress.

Now, the housing bust has produced some European-style immobility even within the US. But there’s still a world of difference. So Florida isn’t Spain.

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abendua 20, 2009 - Posted by | Ekonomia | , , ,

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