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Wage trends and deflation risks in Germany and Europe

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  • Truger, Achim
  • Schulten, Thorsten
  • Hein, Eckhard

Abstract

Based on a post-Keynesian model of the relationship between wages, prices and employment, this paper begins by studying the extent to which unit labour cost trends have been responsible for disinflation and deflationary tendencies in Germany and Europe. Thereafter, the reasons for the deflationary development of unit labour costs in recent years, in particular in Germany, are analysed. Finally, the impact of deflationary wage policies on German and European stagnation are discussed and it is concluded that the excessive wage restraint in Germany not only exacerbates stagnation and deflationary tendencies in Germany but might also have a deflationary impact on the other EMU countries. --

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Bibliographic Info

Paper provided by Wirtschafts- und Sozialwissenschaftliches Institut (WSI), Hans-Böckler-Stiftung in its series WSI Discussion Papers with number 124.

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Date of creation: 2004
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Handle: RePEc:zbw:wsidps:124

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Keywords: Wage trends; deflation; collective bargaining;

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References

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  1. Clarida, R. & Gali, J. & Gertler, M., 1999. "The Science of Monetary Policy: A New Keynesian Perspective," Working Papers 99-13, C.V. Starr Center for Applied Economics, New York University.
  2. N. Gregory Mankiw, 2000. "The Inexorable and Mysterious Tradeoff Between Inflation and Unemployment," Harvard Institute of Economic Research Working Papers 1905, Harvard - Institute of Economic Research.
  3. Olivier Blanchard & Lawrence F. Katz, 1997. "What We Know and Do Not Know about the Natural Rate of Unemployment," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 51-72, Winter.
  4. Hein, Eckhard, 2003. "Die NAIRU: Eine post-keynesianische Interpretation," WSI Discussion Papers 113, Wirtschafts- und Sozialwissenschaftliches Institut (WSI), Hans-Böckler-Stiftung.
  5. Philip Arestis & Malcolm Sawyer, 2002. "'New Consensus,' New Keynesianism, and the Economics of the 'Third Way'," Economics Working Paper Archive wp_364, Levy Economics Institute, The.
  6. Truger, Achim & Hein, Eckhard, 2004. "Macroeconomic co-ordination as an economic policy concept : opportunities and obstacles in the EMU," WSI Discussion Papers 125, Wirtschafts- und Sozialwissenschaftliches Institut (WSI), Hans-Böckler-Stiftung.
  7. Eckhard Hein & Carsten Ochsen, 2003. "Regimes of Interest Rates, Income Shares, Savings and Investment: A Kaleckian Model and Empirical Estimations for some Advanced OECD Economies," Metroeconomica, Wiley Blackwell, vol. 54(4), pages 404-433, November.
  8. Eckhard Hein & Achim Truger, 2005. "What ever happened to Germany? Is the decline of the former european key currency country caused by structural sclerosis or by macroeconomic mismanagement?," International Review of Applied Economics, Taylor & Francis Journals, vol. 19(1), pages 3-28.
  9. Flassbeck, Heiner & Maier-Rigaud, Remi, 2003. "Auf der schiefen Bahn: Die deutsche Lohnpolitik verschärft die Krise," Wirtschaftsdienst – Zeitschrift für Wirtschaftspolitik (1998 - 2007), ZBW – German National Library of Economics / Leibniz Information Centre for Economics, vol. 83(3), pages 170-177.
  10. Boeri, Tito & Brugiavini, Agar & Calmfors, Lars (ed.), 2001. "The Role of Unions in the Twenty-first Century: A Report for the Fondazione Rodolfo Debenedetti," OUP Catalogue, Oxford University Press, number 9780199246588.
  11. Hein, Eckhard, 1999. "Interest Rates, Income Shares, and Investment in a Kaleckian Model," MPRA Paper 18607, University Library of Munich, Germany.
  12. Alan Ahearne & Joseph Gagnon & Jane Haltmaier & Steve Kamin ... [et al.]., 2002. "Preventing deflation: lessons from Japan's experience in the 1990s," International Finance Discussion Papers 729, Board of Governors of the Federal Reserve System (U.S.).
  13. Hein, Eckhard & Truger, Achim, 2005. "European Monetary Union: nominal convergence, real divergence and slow growth?," Structural Change and Economic Dynamics, Elsevier, vol. 16(1), pages 7-33, March.
  14. George A. Akerlof & William R. Dickens & George L. Perry, 1996. "The Macroeconomics of Low Inflation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(1), pages 1-76.
  15. Bernanke, Ben S, 1995. "The Macroeconomics of the Great Depression: A Comparative Approach," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(1), pages 1-28, February.
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Citations

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Cited by:
  1. Beniamino Moro, 2005. "Il “Manifesto” contro la disoccupazione nell’UE sette anni dopo: quali suggerimenti sono sempre attuali?," Moneta e Credito, Economia civile, vol. 58(230-231), pages 51-69.
  2. Tangian, Andranik & Seifert, Hartmut, 2006. "Globalization and deregulation : Does flexicurity protect atypically employed?," WSI Discussion Papers 143, Wirtschafts- und Sozialwissenschaftliches Institut (WSI), Hans-Böckler-Stiftung.
  3. Eckhard Hein & Achim Truger, 2004. "Macroeconomic co-ordination as an economic policy concept - opportunities and obstacles in the EMU," Macroeconomics 0408011, EconWPA.
  4. Tangian, Andranik, 2008. "On the European readiness for flexicurity: Empirical evidence with OECD/HBS methodologies and reform proposals," WSI Discussion Papers 160, Wirtschafts- und Sozialwissenschaftliches Institut (WSI), Hans-Böckler-Stiftung.
  5. Herr, Hansjörg, 2009. "Time, expectations and financial markets," IPE Working Papers 03/2009, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
  6. Tangian, Andranik, 2012. "Statistical test for the mathematical theory of democracy," WSI Discussion Papers 179, Wirtschafts- und Sozialwissenschaftliches Institut (WSI), Hans-Böckler-Stiftung.
  7. Eckhard Hein & Thorsten Schulten, 2004. "Unemployment, wages and collective bargaining in the European Union," Macroeconomics 0412006, EconWPA.
  8. Niechoj, Torsten & Hein, Eckhard, 2004. "Leitlinien für ein dauerhaftes Wachstum in der EU? Konzept und Wirkung der Grundzüge der Wirtschaftspolitik," WSI Discussion Papers 126, Wirtschafts- und Sozialwissenschaftliches Institut (WSI), Hans-Böckler-Stiftung.
  9. Seifert, Hartmut & Tangian, Andranik, 2007. "Flexicurity: Reconciling Social Security with Flexibility - Empirical Findings for Europe," WSI Discussion Papers 154, Wirtschafts- und Sozialwissenschaftliches Institut (WSI), Hans-Böckler-Stiftung.
  10. Beniamino Moro, 2005. "The economists "Manifesto" unemployment in the EU seven years later: which suggestions still hold?," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 58(233-234), pages 49-66.
  11. Schulten, Thorsten, 2004. "Foundations and Perspectives of Trade Union Wage Policy in Europe," WSI Discussion Papers 129, Wirtschafts- und Sozialwissenschaftliches Institut (WSI), Hans-Böckler-Stiftung.
  12. Tangian, Andranik, 2007. "Flexibility-Flexicurity-Flexinsurance: Response to the European Commission's Green Paper "Modernising Labour Law to Meet the Challenges of the 21st Century"," WSI Discussion Papers 149, Wirtschafts- und Sozialwissenschaftliches Institut (WSI), Hans-Böckler-Stiftung.

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