34 Fraser of Allander Institute
This empirical relationship between wages and the local unemployment rate is based on the 'wage curve'
(Blanchflower & Oswald,1995; Minford et al., 1994).
In the variant of the CGE model used in this paper, the labour force is fixed but employment is variable over
time (calibrated in the base year to sectoral total full-time equivalent employment), the unemployment rate can
change, and labour is mobile across sectors. We assume that there is no endogenous migration generated by
the change in activity following the labour productivity shock. This is in keeping with the approach taken by
Hermannsson et al. (2014, 2016, 2017) as such migration would endogenously change the characteristics of the
labour supply. However, we do discuss the likely impact of endogenous migration, as appropriate.
Emonts-Holley et al. (2014) provide a detailed overview of the Scottish Social Accounting Matrix. A full list of
equations is given in Lecca et al. (2013) and Ross (2017) along with a detailed description of the model.