This paper develops a simple model for Fiji’s labour demand and
supply. The model is estimated over the period 1970 to 2000 as an
unrestricted error correction model (ECM), allowing for lagged terms so as
to capture dynamic adjustment effects. The results suggest that Fiji’s
labour market adjusts very slowly to equilibrium levels in period (t) from a
disequilibrium experienced in period (t-1). In the short run, labour force
participation is significantly affected by changes in real wages and
unemployment. However, in the long run, unemployment appears to be
insignificant in determining labour force participation, while real wages
and working population growth have a significant positive impact on
labour force growth. On the labour demand side, changes in real GDP
appear to be positive ly correlated to employment levels. Wages on the
other hand, accounts for very little adjustment.