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Aggregate Wage Flexibility in New EU Member States

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Abstract

A fixed exchange rate regime eliminates one degree of freedom in absorbing macroeconomic shocks. Therefore, there is a call for higher labor market flexibility in countries which are members of the monetary union or those which intend to join the monetary union. Focusing on the cross-country analysis of labor markets in the enlarged European Union, this paper aims to assess empirically the role of aggregate wages as a correction mechanism for dealing with economic disturbances. We apply classical time series/panel, state-space and cointegration techniques to determine the extent to which aggregate wages can accommodate shocks in the economy.

Suggested Citation

  • Jan Babecký, 2008. "Aggregate Wage Flexibility in New EU Member States," Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 2(2), pages 123-145, September.
  • Handle: RePEc:fau:aucocz:au2008_123
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    File URL: http://auco.fsv.cuni.cz/storage/37_2008_01_123.pdf
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    Cited by:

    1. Zuzana Brixiova & Balázs Égert, 2012. "Labour Market Reforms and Outcomes in Estonia," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 54(1), pages 103-120, March.
    2. Pavel Gertler & Matúš Senaj, 2010. "Downward Wage Rigidities in Slovakia," Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 4(1), pages 079-101, March.
    3. Zuzana Brixiova, 2009. "Labour Market Flexibility In Estonia: What More Can Be Done?," William Davidson Institute Working Papers Series wp964, William Davidson Institute at the University of Michigan.
    4. Mihai Rebiga, 2010. "Is Romania Ready for Adopting Euro?," Studies and Scientific Researches. Economics Edition, "Vasile Alecsandri" University of Bacau, Faculty of Economic Sciences, issue 15.
    5. Jan Babecky & Kamil Dybczak & Kamil Galuscak, 2008. "Survey on Wage and Price Formation of Czech Firms," Working Papers 2008/12, Czech National Bank, Research Department.
    6. Tomas Adam & Oxana Babecka Kucharcukova & Jan Babecky & Kamil Galuscak & Tomas Holub & Eva Hromadkova & Narcisa Liliana Kadlcakova & Lubos Komarek & Zlatuse Komarkova & Petr Kral & Ivana Kubicova & Ji, 2012. "Analyses of the Czech Republic's Current Economic Alignment with the Euro Area 2012," Occasional Publications - Edited Volumes, Czech National Bank, Research Department, number as12 edited by Romana Zamazalova & Jakub Mateju.

    More about this item

    Keywords

    ERM-II; euro adoption; labor market; wage flexibility;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • P20 - Economic Systems - - Socialist Systems and Transition Economies - - - General

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