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Inflation Adjustment and Labour Market Structures: Evidence from a Multi-country Study

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Author Info
Christopher Bowdler
Luca Nunziata

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Abstract

The impact of labour market structures on the response of inflation to macroeconomic shocks is analysed empirically. Results based on a 20-country panel show that if labour market coordination is high, the effect on inflation of movements in unemployment, import prices, tax rates and productivity is dampened, both on impact and dynamically. In contrast, monopoly power in labour supply, measured by the percentage unionisation of the workforce, appears to amplify the response of inflation to its reduced-form determinants. These findings are attributed to the behaviour of wages following movements in demand- and supply-side conditions. Copyright The editors of the "Scandinavian Journal of Economics" 2007 .

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1467-9442.2007.00504.x
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Publisher Info
Article provided by Blackwell Publishing in its journal Scandinavian Journal of Economics.

Volume (Year): 109 (2007)
Issue (Month): 3 (09)
Pages: 619-642
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Handle: RePEc:bla:scandj:v:109:y:2007:i:3:p:619-642

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Cukierman, Alex & Lippi, Francesco, 1999. "Central bank independence, centralization of wage bargaining, inflation and unemployment:: Theory and some evidence," European Economic Review, Elsevier, vol. 43(7), pages 1395-1434, June. [Downloadable!] (restricted)
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  2. Belot, M.V.K. & Ours, J. C. van, 2000. "Does the recent success of some OECD countries in lowering their unemployment rates lie in the clever design of their labour market reforms?," Discussion Paper 40, Tilburg University, Center for Economic Research. [Downloadable!]
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  3. Judson, Ruth A. & Owen, Ann L., 1999. "Estimating dynamic panel data models: a guide for macroeconomists," Economics Letters, Elsevier, vol. 65(1), pages 9-15, October. [Downloadable!] (restricted)
  4. John C. Driscoll & Steinar Holden, 2003. "Coordination, fair treatment and inflation persistence," Finance and Economics Discussion Series 2003-34, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
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  5. Reinhart, Carmen & Rogoff, Kenneth, 2004. "The modern history of exchange rate arrangements: A reinterpretation," MPRA Paper 14070, University Library of Munich, Germany. [Downloadable!]
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  6. Gordon de Brouwer & Neil R Ericsson, 1995. "Modelling Inflation in Australia," RBA Research Discussion Papers rdp9510, Reserve Bank of Australia. [Downloadable!]
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  7. repec:rus:hseeco:181565 is not listed on IDEAS
  8. Luca Nunziata, 2005. "Institutions and Wage Determination: a Multi-country Approach," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 67(4), pages 435-466, 08. [Downloadable!] (restricted)
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  9. John C. Driscoll & Steinar Holden, 2004. "Fairness and Inflation Persistence," Journal of the European Economic Association, MIT Press, vol. 2(2-3), pages 240-251, 04/05. [Downloadable!] (restricted)
  10. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-26, November. [Downloadable!] (restricted)
  11. Burdekin, Richard C K & Siklos, Pierre L, 1999. "Exchange Rate Regimes and Shifts in Inflation Persistence: Does Nothing Else Matter?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 31(2), pages 235-47, May.
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  12. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May. [Downloadable!] (restricted)
  13. Boschen, John F. & Weise, Charles L., 2004. "Does the dynamic time consistency model of inflation explain cross-country differences in inflations dynamics?," Journal of International Money and Finance, Elsevier, vol. 23(5), pages 735-759, September. [Downloadable!] (restricted)
  14. Steinar Holden & John C. Driscoll, 2003. "Inflation Persistence and Relative Contracting," American Economic Review, American Economic Association, vol. 93(4), pages 1369-1372, September. [Downloadable!]
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  15. Baltagi, Badi H. & Boozer, Michael A., 1997. "Econometric Analysis of Panel Data," Econometric Theory, Cambridge University Press, vol. 13(05), pages 747-754, October. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Fabio Rumler & Johann Scharler, 2009. "Labor market institutions and macroeconomic volatility in a panel of OECD countries," Working Paper Series 1005, European Central Bank. [Downloadable!]
  2. Roger Bjørnstad and Kjartan Øren Kalstad, 2006. "Increased Price Markup from Union Coordination. OECD Panel Evidence," Discussion Papers 470, Research Department of Statistics Norway. [Downloadable!]
  3. Christopher Bowdler & Luca Nunziata, 2005. "Trade union density and inflation performance: evidence from OECD panel data," "Marco Fanno" Working Papers 0009, Dipartimento di Scienze Economiche "Marco Fanno". [Downloadable!]
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