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Monetary regimes and the co-ordination of wage setting

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  • Holden, Steinar

Abstract

International comparisons show that countries with co-ordinated wage setting generally have lower unemployment than countries with less co-ordinated wage setting. This paper argues that the monetary regime may affect whether co-ordination among many wage setters is feasible. A strict monetary regime, like a country-specific inflation target, to some extent disciplines wage setters, so that the consequences of uncoordinated wage setting are less detrimental than under a more passive monetary regime (eg a monetary union). Thus, the gains from co-ordination are larger under a passive regime. Under some circumstances a passive regime may induce co-operation in wage setting, and thus lower unemployment, when a stricter regime would not.

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Bibliographic Info

Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 49 (2005)
Issue (Month): 4 (May)
Pages: 833-843

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Handle: RePEc:eee:eecrev:v:49:y:2005:i:4:p:833-843

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