Wage leadership models: a country-by-country analysis of the EMU
AbstractAccording to the theory of wage leadership, if there is free inter-sectorial labor mobility, changes in the level of the wage in the leading sector cause changes in the same direction in other sectors’ wage. Moreover, since the traded sector (i.e. Industry) is affected by international competitive pressure, it should act as the leader, because this would be conducive to wage restraint. We apply a Vector Error Correction Model on four macro sectors (Industry, Services, Construction and the Public Sector) in ten EMU countries to test for wage leadership and wage adaptability. Our results show significant cross-country differences, with the Public Sector acting as the leader in Germany, Belgium and Greece. Countries that recently experienced a construction bubble such as Spain and Ireland show wage leadership of the construction sector. Moreover, in half of the countries, wages in different sectors are, to some extent, set autonomously, which suggests low intersectorial labor mobility. Finally, adjustment after a positive vs. negative shock to the leading sector’s wage, in Mediterranean countries, Ireland and the Netherlands is asymmetric.
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Bibliographic InfoPaper provided by Department of Applied Economics II, Universidad de Valencia in its series Working Papers with number 1317.
Length: 29 pages
Date of creation: Jul 2013
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Wage Leadership; Cointegrated VAR; Labor Market;
Find related papers by JEL classification:
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-09-13 (All new papers)
- NEP-EEC-2013-09-13 (European Economics)
- NEP-EUR-2013-09-13 (Microeconomic European Issues)
- NEP-LAB-2013-09-13 (Labour Economics)
- NEP-LMA-2013-09-13 (Labor Markets - Supply, Demand, & Wages)
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