Abstract
The aim of the paper was to evaluate the usefulness of the Austrian Business Cycle Theory (ABCT) in explaining the changes in the wage structure occurring during different phases of the business cycle. Research methods applied are consistent with the methodological viewpoint of the Austrian School of Economics (ASE), using a mix of deductive reasoning and statistical analysis.The analysis of data on wage developments in various sectors of the Lithuanian economy in a cyclical environment has allowed confirming the research hypothesis almost entirely. The study has demonstrated that from 2004 to 2013 during expansion and contraction phases the most dynamic change in wages occurred in sectors that were in the early stages of production, i.e. most distant from consumption, and were producing the most durable consumer durables.Empirical verification of arguments formulated by the ASE is very rare. In global economic literature such studies of changes in the labour market during cyclical fluctuations are scarce. This study fills this gap by confronting the ASE theory with wage changes in a real-life economy.
Highlights
Changes in the labour market are closely and systematically tracked and analysed in periods of accelerated economic expansion as well as, and perhaps especially, during contractions
The aim of the study is to evaluate the use of the Austrian Business Cycle Theory (ABCT) in explaining the changes occurring in the wage structure in different phases of the business cycle
The objectives of the fellowship were to get acquainted with the work and achievements of fellow scientists working for the Institute, and to conduct empirical research on the changes in the Lithuanian labour market occurring in the conditions of cyclical fluctuations in the economy
Summary
Changes in the labour market are closely and systematically tracked and analysed in periods of accelerated economic expansion as well as, and perhaps especially, during contractions. In a free market economy wages are primarily used by market participants on both sides of the labour market as key indicators of what action they should take in order to maximize their gains This leads to changes in employment level and structure. The aim of the study is to evaluate the use of the Austrian Business Cycle Theory (ABCT) in explaining the changes occurring in the wage structure in different phases of the business cycle. This aim will be realised by verifying a hypothesis implied by the ABCT. The objectives of the fellowship were to get acquainted with the work and achievements of fellow scientists working for the Institute, and to conduct empirical research on the changes in the Lithuanian labour market occurring in the conditions of cyclical fluctuations in the economy
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