Europeanization or globalization? Transnational wage bargaining and the distribution of activity in European labor markets
AbstractThis paper investigates the impact of globalization on labor markets, in terms of wage inflation and the distribution of activity across regions. Specifically, we study the effects of aggregation in the labor markets on the distribution of employment and inflation pressures, where there are differences in market structures and transmission mechanisms underpinned by relatively immobile labor. To demonstrate these ideas, we take the European experience as a "laboratory" to show what can be expected from globalization in the labor markets in practice. Using models of wage leadership vs. locational competition, we examine the extent and strength of aggregation effects on labor market costs using a sample of data from 1983 to 2007 which covers the period of the creation of the Euro. We find that the aggregation effect has decreased significantly since the start of EMU, improving the trade-off between inflation and unemployment. At the same time, while Germany played an important role in the run-up to EMU in terms of wage leader, its role has now decreased and been replaced by globalization forces. This implies increased locational competition in terms of wage formation. We demonstrate this with the emerging role of the US as the benchmark for wage setting in Europe.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal The North American Journal of Economics and Finance.
Volume (Year): 20 (2009)
Issue (Month): 2 (August)
Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/620163
Phillips curves Aggregation Locational competition Wage leadership;
Other versions of this item:
- Maria Demertzis & Andrew Hughes Hallett & Nicolien Schermer, 2008. "Europeanization or Globalization? Transnational Wage Bargaining and the Distribution of Activity in European Labor Markets," DNB Working Papers 186, Netherlands Central Bank, Research Department.
- F15 - International Economics - - Trade - - - Economic Integration
- F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
- J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General
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.:
- Diego Puga, 1996.
"The Rise and Fall of Regional Inequalities,"
CEP Discussion Papers
dp0314, Centre for Economic Performance, LSE.
- Jeremy Rudd & Karl Whelan, 2006.
"Can Rational Expectations Sticky-Price Models Explain Inflation Dynamics?,"
American Economic Review,
American Economic Association, vol. 96(1), pages 303-320, March.
- Karl Whelan & Jeremy Rudd, 2003. "Can Rational Expectations Sticky-Price Models Explain Inflation Dynamics?," Computing in Economics and Finance 2003 181, Society for Computational Economics.
- Jeremy Rudd & Karl Whelan, 2003. "Can rational expectations sticky-price models explain inflation dynamics?," Finance and Economics Discussion Series 2003-46, Board of Governors of the Federal Reserve System (U.S.).
- Rudd, Jeremy & Whelan, Karl, 2003. "Can Rational Expectations Sticky-Price Models Explain Inflation Dynamics," Research Technical Papers 5/RT/03, Central Bank of Ireland.
- Bhaskar, V, 1990. "Wage Relativities and the Natural Range of Unemployment," Economic Journal, Royal Economic Society, vol. 100(400), pages 60-66, Supplemen.
- Richard B. Freeman, 1995. "Are Your Wages Set in Beijing?," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 15-32, Summer.
- Fratianni, Michele & von Hagen, Juergen, 1990. "The European Monetary System ten years after," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 32(1), pages 173-241, January.
- Hughes Hallett, A & Ma, Y & Melitz, J, 1995.
"Unification and the Policy Predicament in Gemany,"
01, American Institute for Contemporary German Studies-.
- Maria Demertzis & Andrew Hallett & Ole Rummel, 2000. "Is the European union a natural currency area, or is it held together by policy makers?," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 136(4), pages 657-679, December.
- Edward H. Gardner & William R. M. Perraudin, 1993. "Asymmetry in the ERM: A Case Study of French and German Interest Rates Before and After German Unification," IMF Staff Papers, Palgrave Macmillan, vol. 40(2), pages 427-450, June.
- Artis, Michael J & Ormerod, Paul, 1991. "Is There an `EMS' Effect in European Labour Markets?," CEPR Discussion Papers 598, C.E.P.R. Discussion Papers.
- Brechling, Frank, 1973. "Wage Inflation and the Structure of Regional Unemployment," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 5(1), pages 355-79, Part II F.
- Thirlwall, A P, 1970. "Regional Phillips Curves," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 32(1), pages 19-32, February.
- Michael Artis & Dilip Nachane, 1990.
"Wages and prices in Europe: A test of the German leadership thesis,"
Review of World Economics (Weltwirtschaftliches Archiv),
Springer, vol. 126(1), pages 59-77, March.
- Artis, Michael J & Nachane, Dilip M, 1989. "Wages and Prices in Europe: A Test of the German Leadership Thesis," CEPR Discussion Papers 296, C.E.P.R. Discussion Papers.
- Hallett, A.J. Hughes, 2000. "Aggregate Phillips Curves Are Not Always Vertical: Heterogeneity And Mismatch In Multiregion Or Multisector Economies," Macroeconomic Dynamics, Cambridge University Press, vol. 4(04), pages 534-546, December.
- Cross,Rod Preface by-Name:Blanchard,Olivier (ed.), 1995. "The Natural Rate of Unemployment," Cambridge Books, Cambridge University Press, number 9780521483308, November.
- M. Demertzis & A.J. Huges Hallett, 2001.
"Wage Inflation and the Distribution of Output Gaps in Europe: Insidersvs. Outsiders,"
DNB Staff Reports (discontinued)
59, Netherlands Central Bank.
- M. Demertzis & A. Hughes Hallett, 2000. "Wage Inflation and the Distribution of Output Gaps in Europe: Insiders vs. Outsiders," WO Research Memoranda (discontinued) 631, Netherlands Central Bank, Research Department.
- De Grauwe, Paul, 1989. "Is the European Monetary System a DM-Zone?," CEPR Discussion Papers 297, C.E.P.R. Discussion Papers.
- Athanasios Vamvakidis, 2009. "Regional Wage Differentiation and Wage Bargaining Systems in the European Union," Financial Theory and Practice, Institute of Public Finance, vol. 33(1), pages 73-87.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.