Till labor cost do us part. On the long run convergence of EMU countries
AbstractA sustainable long-run pattern in the relative competitiveness of euro area countries is a key factor for the survivorship of the monetary union. We analyze the issue focussing on unit labor cost dynamics using cointegration analysis for the whole economy and for the manufacturing sector separately. Our findings show that the introduction of the euro has increased, rather than decreased, the distance among member countries, as measured in the metric of unit labor costs. Dispersion of productivity rather than wage compensation suggests that persisting idiosyncratic dynamics are driven by real factors, i.e. diverging technological patterns rather than by monetary factors, expressed by wage compensation.
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Bibliographic InfoPaper provided by Dipartimento Scienze Economiche, Universita' di Bologna in its series Working Papers with number wp759.
Date of creation: Jun 2011
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Find related papers by JEL classification:
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-06-18 (All new papers)
- NEP-EEC-2011-06-18 (European Economics)
- NEP-EUR-2011-06-18 (Microeconomic European Issues)
- NEP-OPM-2011-06-18 (Open Economy Macroeconomic)
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