How bad is Divergence in the Euro-Zone? Lessons from the United States of America and Germany
AbstractThis paper compares relative unit labour cost developments in the countries of the euro-area since the beginning of the European Monetary Union (EMU) both with historical developments and with intra-regional unit labour cost developments in the United States of America and Germany. To this end, unit labour cost indices for the US states and census regions from 1977 to 1997 as well as for the German Länder from 1970 to 2004 have been constructed. Against this benchmark, it is found that unit labour cost increases since 1999 in Portugal and to a lesser extent in Spain and Greece can be judged as excessive, pointing at labour market rigidities which might impair smooth working of EMU in the future.
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Bibliographic InfoPaper provided by Hamburg University, Department Wirtschaft und Politik in its series Macroeconomics and Finance Series with number 200605.
Length: 34 pages
Date of creation: Oct 2006
Date of revision:
Unit labor costs; divergence; convergence; Euro-zone; inflation;
Find related papers by JEL classification:
- F2 - International Economics - - International Factor Movements and International Business
- F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
- N2 - Economic History - - Financial Markets and Institutions
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-01-23 (All new papers)
- NEP-EEC-2007-01-23 (European Economics)
- NEP-MON-2007-01-23 (Monetary Economics)
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