Advanced Search
MyIDEAS: Login

Wage growth dispersion across the euro area countries - some stylised facts

Contents:

Author Info

  • Malin Andersson
  • Arne Gieseck
  • Beatrice Pierluigi
  • Nick Vidalis
Registered author(s):

    Abstract

    This study presents some stylised facts on wage growth differentials across the euro area countries in the years before and in the first eight years after the introduction of Economic and Monetary Union (EMU) in 1999. The study shows that wage growth dispersion, i.e. the degree of difference in wage growth at a given point in time, has been on a clear downward trend since the early 1980s. However, wage growth dispersion across the euro area countries still appears to be higher than the degree of wage growth dispersion within West Germany, the United States, Italy and Spain. Differences in wage growth rates between individual euro area countries and the euro area in the years before and in the first eight years after the introduction of EMU appear to be positively related to the respective differences between their Harmonised Index of Consumer Prices (HICP) inflation and average HICP inflation in the euro area. Conversely, relative wage growth differentials across euro area countries have been somewhat unrelated to relative productivity growth differentials. Some countries combine positive wage growth differentials and negative productivity growth differentials vis-à-vis the euro area average over an extended period – and hence positive unit labour cost growth differentials. These countries run the risk of accumulating competitiveness losses and it is therefore a challenge to ensure that the necessary adjustment mechanisms operate fully, in the sense that wage developments are sufficiently flexible and reflect productivity developments. Wage growth persistence within individual euro area countries – largely reflecting inflation persistence and certain institutional factors – might also have contributed somewhat to wage growth differentials across the euro area countries. Moreover, wage level convergence has also played a role in explaining wage growth patterns in the 1980s and the 1990s. However, since 1999, the link between the initial compensation level and the subsequent growth rate of compensation per employee appears barely significant. The study also shows a limited co-movement of wage growth across countries, even in the context of a high degree of business cycle synchronisation seen in the last few years. This suggests that the impact on wage growth of country-specific developments across euro area countries has been larger than the impact of common cyclical developments and external shocks. This could reflect the normal and desirable working of adjustment mechanisms, which – in an optimally functioning currency union with synchronised business cycles – would take place via price and cost and wage developments. On the other hand, structural impediments, for example a relatively low degree of openness in domestically-oriented sectors in some countries, might prevent a stronger link between the degree of synchronisation of wage growth rates and business cycles. JEL Classification: E24, E31, C10.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.ecb.europa.eu/pub/pdf/scpops/ecbocp90.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by European Central Bank in its series Occasional Paper Series with number 90.

    as in new window
    Length: 54 pages
    Date of creation: Jul 2008
    Date of revision:
    Handle: RePEc:ecb:ecbops:20080090

    Contact details of provider:
    Postal: Postfach 16 03 19, Frankfurt am Main, Germany
    Phone: +49 69 1344 0
    Fax: +49 69 1344 6000
    Web page: http://www.ecb.europa.eu/home/html/index.en.html
    More information through EDIRC

    Order Information:
    Postal: Press and Information Division, European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany
    Email:

    Related research

    Keywords: Cross-country wage dispersion; wage and productivity levels across countries and sectors.;

    Find related papers by JEL classification:

    This paper has been announced in the following NEP Reports:

    References

    No references listed on IDEAS
    You can help add them by filling out this form.

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:ecb:ecbops:20080090. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Official Publications).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.