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Abstract(s)
In this paper we provide an axplanation for the relative flexibility of the Portuguese labour market. We find that in Portugal, contrary to what happens in the rest of Europe, unemployment exerts a significant downward pressure on manufacturing wages. We obtain a long-run Phillips curve where the labour share (adjusted for the minimum wage) is found to respond significantly to the slack in the labour market. This accounts for the low level of unemployment and small unemployment persistence registered in Portugal, when compared with other countries. The theoretical framework used is a bargaining model, where unions and firms try to optimize their goals.