One currency and many modes of wage formation: Why the eurozone is too heterogeneous for the euro
Synchronization of national price inflation is the crucial precondition for a well-functioning fixed exchange rate regime. Given the close relationship between wage inflation and price inflation, convergence of price inflation requires the synchronization of wage inflation. Why did the convergence of wage inflation fail during the first ten years of the euro? While differences in economic growth shape the inflation of labor costs, our argument is that the type of wage regime has an additional, independent impact. In coordinated labor market regimes, increases in nominal unit labor costs tended to fall below the ECB's inflation target, while in uncoordinated labor regimes, the respective increases tended to exceed the European inflation target. To show this, we analyze data from 1999-2008 for twelve euro members. We estimate the increases of nominal unit labor costs both in the overall economy and in manufacturing as dependent variables, test a variety of labor- and wage-regime indicators, and control for a battery of economic, political, and institutional variables. Neither the transfer of wage coordination from the North to the South nor the transfer of adjustment pressure from the South to the North is likely to solve the problem of inner-European exchange-rate distortions.
Year of publication: |
2014
|
---|---|
Authors: | Höpner, Martin ; Lutter, Mark |
Publisher: |
Cologne : Max Planck Institute for the Study of Societies |
Saved in:
freely available
Series: | MPIfG Discussion Paper ; 14/14 |
---|---|
Type of publication: | Book / Working Paper |
Type of publication (narrower categories): | Working Paper |
Language: | English |
Other identifiers: | 794360483 [GVK] hdl:10419/101319 [Handle] RePEc:zbw:mpifgd:1414 [RePEc] |
Source: |
Persistent link: https://www.econbiz.de/10010397746
Saved in favorites
Similar items by person
-
One currency and many modes of wage formation : why the eurozone is too heterogeneous for the euro
Höpner, Martin, (2014)
-
One Currency and Many Modes of Wage Formation. Why the Eurozone is Too Heterogeneous for the Euro
Höpner, Martin, (2015)
-
One currency and many modes of wage formation: Why the eurozone is too heterogeneous for the euro
Höpner, Martin, (2014)
- More ...