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Has the EMU reduced wage growth and unemployment? Testing a model of trade union behavior

  • Mikosch, Heiner
  • Sturm, Jan-Egbert

Grüner (2010) argues that the introduction of the European Monetary Union (EMU) led to lower wage growth and lower unemployment in participating countries. According to Grüner, monetary centralization increases the amplitude of national business cycles, which leads to higher unemployment risk. In order to counter-balance this effect, trade unions lower their claims for wage mark-ups, resulting in lower wage growth and lower unemployment. This paper uses macroeconomic data on OECD countries and a difference-in-differences approach to empirically test the implications of this model. Although we come up with some weak evidence for increased business cycle amplitudes within the EMU, we neither find a significant general effect of the EMU on wage growth nor on unemployment.

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Article provided by Elsevier in its journal European Journal of Political Economy.

Volume (Year): 28 (2012)
Issue (Month): 1 ()
Pages: 27-37

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Handle: RePEc:eee:poleco:v:28:y:2012:i:1:p:27-37
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505544

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