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Wage Inflation and the Distribution of Output Gaps in Europe: Insidersvs. Outsiders

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Author Info
M. Demertzis
A.J. Huges Hallett

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Abstract

This 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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Paper provided by Netherlands Central Bank in its series DNB Staff Reports (discontinued) with number 59.

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Length: 53 pages
Date of creation: 2001
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Handle: RePEc:dnb:staffs:59

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Find related papers by JEL classification:
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, and Vacancies - - - General

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Hughes Hallett, A. & Ma, Y. & Melitz, J., 1996. "Unification and the policy predicament in Germany," Economic Modelling, Elsevier, vol. 13(4), pages 519-544, October. [Downloadable!] (restricted)
    Other versions:
  2. Brechling, Frank, 1973. "Wage Inflation and the Structure of Regional Unemployment," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 5(1), pages 355-79, Part II F. [Downloadable!] (restricted)
  3. Artis, Michael J & Nachane, Dilip M, 1989. "Wages and Prices in Europe: A Test of the German Leadership Thesis," CEPR Discussion Papers 296, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  4. Thirlwall, A P, 1970. "Regional Phillips Curves," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 32(1), pages 19-32, February.
  5. repec:cup:macdyn:v:4:y:2000:i:4:p:534-46 is not listed on IDEAS
  6. Bhaskar, V, 1990. "Wage Relativities and the Natural Range of Unemployment," Economic Journal, Royal Economic Society, vol. 100(400), pages 60-66, Supplemen. [Downloadable!] (restricted)
  7. Artis, Michael J & Ormerod, Paul, 1991. "Is There an `EMS' Effect in European Labour Markets?," CEPR Discussion Papers 598, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  8. Hallett, A.J. Hughes, 2000. "Aggregate Phillips Curves Are Not Always Vertical: Heterogeneity And Mismatch In Multiregion Or Multisector Economies," Macroeconomic Dynamics, Cambridge University Press, vol. 4(04), pages 534-546, December. [Downloadable!]
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Maria Demertzis & Andrew Hughes Hallett & Nicolien Schermer, 2008. "Europeanization or Globalization? Transnational Wage Bargaining and the Distribution of Activity in European Labor Markets," DNB Working Papers 186, Netherlands Central Bank, Research Department. [Downloadable!]
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