Wage Inflation and the Distribution of Output Gaps in Europe: Insidersvs. Outsiders
AbstractThis paper examines whether Europe's monetary union framework of "ins" and "outs" reflects differences in market structures underpinned by relatively immobile labour. Such a situation could give rise to sufficient nominal convergence to satisfy the entry requirements to EMU, but little real convergence and hence a significant incentive for some to stay outside. Using models of wage leadership vs. locational competition, we examine the extent and strength of integration in labour market costs using a sample of data covering the 1980s and 1990s - i.e. for the run up to EMU. This exposes a conflict between real and nominal convergence which is ultimately incompatible with further integration. As a result wage bargainers now appear to focus more on their own domestic market conditions. That may deliver a better economic performance, but little extra integration.
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Bibliographic InfoPaper provided by Netherlands Central Bank in its series DNB Staff Reports (discontinued) with number 59.
Length: 53 pages
Date of creation: 2001
Date of revision:
Other versions of this item:
- M. Demertzis & A. Hughes Hallett, 2000. "Wage Inflation and the Distribution of Output Gaps in Europe: Insiders vs. Outsiders," WO Research Memoranda (discontinued) 631, Netherlands Central Bank, Research Department.
- F15 - International Economics - - Trade - - - Economic Integration
- F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
- J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General
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