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How flexible are real wages in EU countries? A panel investigation

Author

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  • Rusinova, Desislava
  • Lipatov, Vilen
  • Heinz, Frigyes Ferdinand

Abstract

We estimate the degree of real wage flexibility in 19 EU countries in a wage Phillips curve panel framework. We find evidence for a reaction of wage growth to unemployment and productivity growth. The degree of real wage flexibility tends to be larger in the central and eastern European (CEE) countries than in the euro area; weaker in downturns than during upswings. There exists an inflation threshold, below which real wage flexibility is low. We also find that a part of the heterogeneity in real wage flexibility and unemployment may be related to differences in the wage bargaining institutions.

Suggested Citation

  • Rusinova, Desislava & Lipatov, Vilen & Heinz, Frigyes Ferdinand, 2015. "How flexible are real wages in EU countries? A panel investigation," Journal of Macroeconomics, Elsevier, vol. 43(C), pages 140-154.
  • Handle: RePEc:eee:jmacro:v:43:y:2015:i:c:p:140-154
    DOI: 10.1016/j.jmacro.2014.10.002
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    References listed on IDEAS

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    1. repec:kap:openec:v:28:y:2017:i:5:d:10.1007_s11079-017-9463-y is not listed on IDEAS
    2. Robert Anderton & Arno Hantzsche & Simon Savsek & Máté Tóth, 2017. "Sectoral Wage Rigidities and Labour and Product Market Institutions in the Euro Area," Open Economies Review, Springer, vol. 28(5), pages 923-965, November.

    More about this item

    Keywords

    Real wage flexibility; Phillips curve; Labour market institutions; Unemployment; Inflation; Productivity;

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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