This paper provides an empirical investigation of the wage, price and unemployment dynamics that have taken place in Spain during the last two decades. The aim of this paper is to shed light on the impact of the European economic integration process on Spanish labour market and the convergence to a European level of prosperity. We find some important lessons to be learnt from the Spanish experience that should be relevant for the new member states. Second, before fixing the real exchange rate it seems crucial that it is on its sustainable (competitive) purchasing power parity level. First, high competitiveness in the tradable sector seems crucial for the real and nominal convergence to be successful. The increase in consumption wages and consumer prices as a result of the Balassa-Samuelson effect should not be allowed to exceed the improvement in productivity. Second, before fixing the real exchange rate it seems crucial that it is on its sustainable (competitive) purchasing power parity level. Third, there does not seem to be a short-cut to a European level of standard of living: the path to sustainable prosperity seems to follow the path of productivity improvement. Forth, excessive real wage increases seem to lead to increasing unemployment, slowdown in productivity growth, higher interest rates, and loss of competitiveness. On the other hand, the access to the European market and the possibility of increased export demand is likely to speed up the convergence process as long as competitiveness is not eroded by excess wage increases.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
file. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by Kiel Institute for the World Economy in its series Economics Discussion Papers with number
2008-20.
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.: