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Has EMU had any Impact on the Degree of Wage Restraint?

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Author Info
Adam Posen ()
Daniel Popov Gould

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Abstract

We find in cross-sectional investigations that wage restraint is either unchanged or increased following EMU in the vast majority of countries. This contradicts the predictions of a widely-cited family of models of labor market bargaining. In those, Germany would have been expected to display the greatest decline in wage restraint post-EMU, and we find no indication of such a decline. The time-series evidence on Italy shows a significant increase in wage restraint after eurozone entry. This pattern is consistent with the models that emphasise the gains from monetary credibility. The eurozone increase in wage restraint is matched by the increase seen in the UK and Sweden after adopting inflation targeting, another means to credibility.

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Paper provided by CESifo GmbH in its series CESifo Working Paper Series with number CESifo Working Paper No. 1783.

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Date of creation: 2006
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Handle: RePEc:ces:ceswps:_1783

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Related research
Keywords: EMU wage bargaining monetary credibility productivity

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Find related papers by JEL classification:
E25 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
J58 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Public Policy

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References listed on IDEAS
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