Advanced Search
MyIDEAS: Login to save this paper or follow this series

Openness, Centralized Wage Bargaining, and Inflation

Contents:

Author Info

  • Joseph P. Daniels

    ()
    (Center for Global and Economic Studies, Marquette University)

  • Farrokh Nourzad

    ()
    (Department of Economics, Marquette University)

  • David D. VanHoose

    ()
    (Hanmaker School of Business, Baylor University)

Abstract

This paper develops a model of an open economy containing both sectors in which wages are market-determined and sectors with wage-setting arrangements. A portion of the latter group of sectors coordinate their wages, taking into account that their collective actions influence the equilibrium inflation outcome in an environment in which the central bank engages in discretionary monetary policymaking. Key predictions forthcoming from this model are (1) increased centralization of wage setting initially causes inflation to increase at low degrees of wage centralization but then, as wage centralization increases, results in an inflation dropoff; (2) a greater degree of centralized wage setting reduces the inflation-restraining effect of greater central bank independence; and (3) increased openness is more likely to reduce inflation in nations with less centralized wage bargaining. Analysis of data for seventeen nations for the period 1970-1999 provides generally strong and robust empirical support for all three of these predictions.

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.busadm.mu.edu/mrq/workingpapers/wpaper0505.pdf
File Function: First Version, 2005-01
Download Restriction: no

Bibliographic Info

Paper provided by Marquette University, Center for Global and Economic Studies and Department of Economics in its series Working Papers and Research with number 0505.

as in new window
Length: 42 pages
Date of creation: Jan 2005
Date of revision:
Publication status: Published in European Journal of Political Economy, December 2006, pages 969-968
Handle: RePEc:mrq:wpaper:0505

Contact details of provider:
Postal: P.O. Box 1881, Milwaukee WI 53201-1881
Phone: (414) 288-7377
Email:
Web page: http://www.busamd.mu.edu/Economics/
More information through EDIRC

Related research

Keywords: Openness; Centralized wage setting; inflation;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

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.:
as in new window
  1. Cukierman Alex, 1992. "Central Bank Strategy, Credibility, And Independance: Theory And Evidence," Journal des Economistes et des Etudes Humaines, De Gruyter, vol. 3(4), pages 10, December.
  2. repec:ese:iserwp:2003-23 is not listed on IDEAS
  3. Persson, Torsten & Tabellini, Guido, 1999. "Political economics and macroeconomic policy," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 22, pages 1397-1482 Elsevier.
  4. Barro, Robert J & Gordon, David B, 1983. "A Positive Theory of Monetary Policy in a Natural Rate Model," Journal of Political Economy, University of Chicago Press, vol. 91(4), pages 589-610, August.
  5. Andrew T. Levin & Jeremy M. Piger, 2003. "Is inflation persistence intrinsic in industrial economies?," Working Papers 2002-023, Federal Reserve Bank of St. Louis.
  6. Micahael Tomz & Jason Wittenberg & Gary King, . "Clarify: Software for Interpreting and Presenting Statistical Results," Journal of Statistical Software, American Statistical Association, vol. 8(i01).
  7. Cukierman, A. & Lippi, F., 1999. "Labor markets and Monetary Union: A Strategic Analysis," Discussion Paper 1999-100, Tilburg University, Center for Economic Research.
  8. Iversen, Torben, 1998. "Wage Bargaining, Central Bank Independence, and the Real Effects of Money," International Organization, Cambridge University Press, vol. 52(03), pages 469-504, June.
  9. Duca, John V. & Van Hoose, David D., 2001. "The Rise of Goods-Market Competition and the Fall of Nominal Wage Contracting: Endogenous Wage Contracting in a Multisector Economy," Journal of Macroeconomics, Elsevier, vol. 23(1), pages 1-29, January.
  10. Matthew B. Canzoneri & Dale W. Henderson, 1991. "Monetary Policy in Interdependent Economies: A Game-Theoretic Approach," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262031787, December.
  11. Iversen, Torben, 1999. " The Political Economy of Inflation: Bargaining Structure or Central Bank Independence? Erratum," Public Choice, Springer, vol. 101(3-4), pages 285-306, December.
  12. Jane Ihrig & Jaime Marquez, 2003. "An empirical analysis of inflation in OECD countries," International Finance Discussion Papers 765, Board of Governors of the Federal Reserve System (U.S.).
  13. Wiji Arulampalam & Alison L. Booth & Mark L. Bryan, 2004. "Training in Europe," Journal of the European Economic Association, MIT Press, vol. 2(2-3), pages 346-360, 04/05.
  14. Guzzo, Vincenzo & Velasco, Andres, 1999. "The case for a populist Central Banker," European Economic Review, Elsevier, vol. 43(7), pages 1317-1344, June.
  15. Hall, Peter A. & Franzese, Robert J., 1998. "Mixed Signals: Central Bank Independence, Coordinated Wage Bargaining, and European Monetary Union," International Organization, Cambridge University Press, vol. 52(03), pages 505-535, June.
  16. Cukierman, A. & Lippi, F., 1998. "Central Bank Independence, Centralization of Wage Bargaining, Inflation and Unemployment - Theory and Some Evidence," Discussion Paper 1998-116, Tilburg University, Center for Economic Research.
  17. David Soskice & Torben Iversen, 2000. "The Nonneutrality Of Monetary Policy With Large Price Or Wage Setters," The Quarterly Journal of Economics, MIT Press, vol. 115(1), pages 265-284, February.
  18. Atish R. Ghosh & Anne-Marie Gulde & Holger C. Wolf, 2003. "Exchange Rate Regimes: Choices and Consequences," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262072408, December.
  19. John V. Duca & David D. VanHoose, 2000. "Has Greater Competition Restrained U.S. Inflation?," Southern Economic Journal, Southern Economic Association, vol. 66(3), pages 729=741, January.
  20. Cukierman, A. & Lippi, F., 1998. "Central Bank Independence, Centralization of Wage Bargaining, Inflation and Unemployment: Theory and Evidence," Papers 332, Banca Italia - Servizio di Studi.
  21. David Romer, 1991. "Openness and Inflation: Theory and Evidence," NBER Working Papers 3936, National Bureau of Economic Research, Inc.
  22. James McHugh, 2002. "Wage Centralization, Union Bargaining, and Macroeconomic Performance," IMF Working Papers 02/143, International Monetary Fund.
  23. Al-Marhubi, Fahim & Willett, Thomas D, 1995. " The Anti Inflationary Influence of Corporatist Structures and Central Bank Independence: The Importance of the Hump Shaped Hypothesis," Public Choice, Springer, vol. 84(1-2), pages 153-62, July.
  24. Iversen, Torben, 1999. " The Political Economy of Inflation: Bargaining Structure or Central Bank Independence?," Public Choice, Springer, vol. 99(3-4), pages 237-58, June.
  25. Jay Bryson & Henrik Jensen & David Hoose, 1993. "Rules, discretion, and international monetary and fiscal policy coordination," Open Economies Review, Springer, vol. 4(2), pages 117-132, June.
  26. Skott, Peter, 1997. "Stagflationary Consequences of Prudent Monetary Policy in a Unionized Economy," Oxford Economic Papers, Oxford University Press, vol. 49(4), pages 609-22, October.
  27. Ball, Laurence, 1988. "Is Equilibrium Indexation Efficient?," The Quarterly Journal of Economics, MIT Press, vol. 103(2), pages 299-311, May.
  28. Cubitt, Robin P, 1995. " Corporatism, Monetary Policy and Macroeconomic Performance: A Simple Game Theoretic Analysis," Scandinavian Journal of Economics, Wiley Blackwell, vol. 97(2), pages 245-59, June.
  29. Lars Calmfors, 2001. "Wages and Wage-Bargaining Institutions in the Emu : A Survey of the Issues," CESifo Working Paper Series 520, CESifo Group Munich.
  30. Daniels, Joseph P. & VanHoose, David D., 2006. "Openness, the sacrifice ratio, and inflation: Is there a puzzle?," Journal of International Money and Finance, Elsevier, vol. 25(8), pages 1336-1347, December.
  31. Eijffinger, Sylvester & Hoeberichts, Marco & Schaling, Eric, 2000. " Optimal Central Bank Conservativeness in an Open Economy," Public Choice, Springer, vol. 105(3-4), pages 339-55, December.
  32. Cubitt, Robin P, 1992. "Monetary Policy Games and Private Sector Precommitment," Oxford Economic Papers, Oxford University Press, vol. 44(3), pages 513-30, July.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Gernot Pehnelt, 2007. "Globalisation and Inflation in OECD Countries," Jena Economic Research Papers 2007-055, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  2. Joseph P. Daniels & David D. VanHoose, 2007. "Openness, Income-Tax Progressivity, and Inflation," Working Papers and Research 0704, Marquette University, Center for Global and Economic Studies and Department of Economics.
  3. Daniels, Joseph P & VanHoose, David D, 2010. "Exchange-Rate Pass Through, Openness, and the Sacrifice Ratio," Working Papers and Research 2010-05, Marquette University, Center for Global and Economic Studies and Department of Economics.
  4. Hansen, Jørgen Drud & Nielsen, Jørgen Ulff-Møller & Molana, Hassan & Montagna, Catia, 2010. "Work Hours, Social Value of Leisure and Globalisation," SIRE Discussion Papers 2010-08, Scottish Institute for Research in Economics (SIRE).
  5. Richard W. Evans, 2012. "Is Openness Inflationary? Policy Commitment and Imperfect Competition," BYU Macroeconomics and Computational Laboratory Working Paper Series 2012-06, Brigham Young University, Department of Economics, BYU Macroeconomics and Computational Laboratory.
  6. Joseph Daniels & David VanHoose, 2009. "Trade Openness, Capital Mobility, and the Sacrifice Ratio," Open Economies Review, Springer, vol. 20(4), pages 473-487, September.
  7. Marzinotto Benedicta, 2008. "Why so much wage restraint in EMU? The role of country size - Integrating trade theory with monetary policy regime accounts," wp.comunite 0035, Department of Communication, University of Teramo.
  8. Hartmut Egger & Daniel Etzel, 2012. "Union Wage Setting and International Trade," CESifo Working Paper Series 3929, CESifo Group Munich.
  9. Magali Jaoul-Grammare & Isabelle Terraz, 2010. "Syndicalisation et croissance économique : y a-t-il une exception française ?," Working Papers of BETA 2010-25, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  10. Bowdler, Christopher & Nunziata, Luca, 2010. "Labor market structures and the sacrifice ratio," Journal of Macroeconomics, Elsevier, vol. 32(3), pages 816-826, September.
  11. Cavallero, Alessandro, 2011. "The convergence of inflation rates in the EU-12 area: A distribution dynamics approach," Journal of Macroeconomics, Elsevier, vol. 33(2), pages 341-357, June.

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:mrq:wpaper:0505. 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: (Joseph P. Daniels).

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.