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Does the Dispersion of Unit Labor Cost Dynamics in the EMU Imply Long-Run Divergence?: Results from a Comparison with the United States of America and Germany

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  • Sebastian Dullien
  • Ulrich Fritsche

Abstract

Using unit labor cost (ULC) data from Euro area countries as well as US States and German Länder we investigate inflation convergence using different approaches, namely panel unit root tests, co-integration tests and error-correction models. All in all we cannot reject convergence of ULC growth in EMU, however, country-specific deviations from the rest of the currency union are more pronounced in Europe and more persistent. This holds before and after the introduction of the common currency.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.55816.de/dp674.pdf
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Bibliographic Info

Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 674.

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Length: 38 p.
Date of creation: 2007
Date of revision:
Publication status: Published in: Internatiional Economics and Economic Policy 5(2008) 3, 269-295
Handle: RePEc:diw:diwwpp:dp674

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Keywords: Unit labor costs; inflation; EMU; convergence; panel unit root tests; convergence clubs;

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Cited by:
  1. Nicolas Canry & Arnaud Lechevalier, 2006. "Wage share variations in France and Germany since 1970: what does really matter?," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00140529, HAL.
  2. Herbert S. Buscher & Hubert Gabrisch, 2009. "Is the European Monetary Union an Endogenous Currency Area? The Example of the Labor Markets," IWH Discussion Papers 7, Halle Institute for Economic Research.
  3. Helmut Herwartz & Florian Siedenburg, 2013. "To converge or not converge: unit labor cost inflation in the Euro area," Empirical Economics, Springer, vol. 44(2), pages 455-467, April.
  4. Ulrich Fritsche & Vladimir Kuzin, 2011. "Analysing convergence in Europe using the non-linear single factor model," Empirical Economics, Springer, vol. 41(2), pages 343-369, October.
  5. Francesca Pancotto & Filippo Pericoli, 2011. "Till Labor Cost Do Us Part A Vecm Model of Unit Labor Cost Convergence in the Euro Area," Working Papers 14, Doctoral School of Economics, Sapienza University of Rome, revised 2011.

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