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Discussion comments on "Labour markets in newly integrating economies such as India and China: are they different?"

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  • Economics
  • Education

Abstract

Discussion comments on "Labout markets in newly integrating economies such as India and China: are they different? - Supply constraints, education and the risk of inflation" BIS Papers No 50 129 Discussion comments on “Labour markets in newly integrating economies such as India and China: are they different?” Supply constraints, education and the risk of inflation Patrick Artus Introduction When considering the overall global situation, we conclude that there should not be any inflation, even if the world’s monetary policy is very expansionary. The overall global capacity to produce more is in fact very substantial, due to a very high level of investment and to disguised unemployment, particularly in rural areas, which means that there is scope to increase the labour force significantly. In this situation of excess global supply of goods and labour, monetary expansion is leading to a rise in asset prices, not in prices of goods – of course with the exception of commodities. Nevertheless, inflation is appearing in some countries, for example China, Hungary, India, Romania, Russia and Turkey, as these countries are characterised by rapid growth in liquidity, and therefore in domestic demand. Professor Tendulkar’s paper focuses on the differences between the way the labour markets function in India and China. We follow a similar approach. If current inflation is not a result of the recent rises in commodity prices, it can only be explained by rigidity in the supply of goods and services, despite its apparent abundance. This rigidity can be explained by a shortfall in investment; problems related to education; problems of sectoral specialisation which does not match demand; and insufficient international mobility of goods and services. We find that these problems are specific to the above-mentioned countries, and there is no reason to conclude that global inflation is reappearing. 1. Apart from the effect of commodity prices, there is no globa

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