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Public wages in the euro area - towards securing stability and competitiveness

Author

Listed:
  • Holm-Hadulla, Fédéric
  • Kamath, Kishore
  • Lamo, Ana
  • Pérez, Javier J.
  • Schuknecht, Ludger

Abstract

This paper examines the role of government wages in ensuring macroeconomic stability and competitiveness in the euro area. Recent empirical evidence suggests that government wage expenditure is subject to a pro-cyclical bias in most euro area countries and at the euro area aggregate level. Moreover, the evidence points to a strong positive correlation and co-movement between public and private wages in the short to medium term, both directly and indirectly via the price level, in most euro area countries. In a number of countries this interrelation between public and private wages coincided with strong public wage growth and competitiveness losses. These findings underpin the need for prudent public wage policies supported by strong domestic fiscal frameworks and appropriate wage-setting institutions in order to enhance economic stability and competitiveness in Economic and Monetary Union. JEL Classification: E22, E50

Suggested Citation

  • Holm-Hadulla, Fédéric & Kamath, Kishore & Lamo, Ana & Pérez, Javier J. & Schuknecht, Ludger, 2010. "Public wages in the euro area - towards securing stability and competitiveness," Occasional Paper Series 112, European Central Bank.
    • Handle: RePEc:ecb:ecbops:2010112
    Note: 1624014
    as

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    File URL: https://www.ecb.europa.eu//pub/pdf/scpops/ecbocp112.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    competitiveness; fiscal cyclicality; government wage expenditure;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

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