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Monetary Regimes and the Co-Ordination of Wage Setting

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  • Steinar Holden

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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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2001/wp-cesifo-2001-03/cesifo_wp429.pdf
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 429.

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Date of creation: 2001
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Handle: RePEc:ces:ceswps:_429

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Keywords: Wage setting; co-ordination; equilibrium unemployment; monetary regime; monetary union; wage moderation;

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