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Is there a European wage leader? Wage spillovers in the European Monetary Union

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  • Paul Ramskogler

Abstract

The introduction of the euro had been accompanied by expectations of increased inflationary pressures due to a de-coordination shock to national wage bargaining systems. Though, if anything systematically happened after the introduction of the euro, wage restraint increased. This paper argues that an interdependency of wage setting under German dominance has emerged in Europe, which fuelled the transmission of mutual wage restraint. We will investigate wage and nominal unit labour cost spillovers in the European Monetary Union (EMU) exploring a panel of 13 manufacturing sectors from 1992 to 2005 and quantify the effects of different countries. Strong interdependencies across EMU member countries with regard to nominal wage growth are found. A leading role accrues to Germany, which is responsible for a cumulative reduction of trans-European wage growth rates of 0.62% by conservative estimates. Remarkably, the influence of Germany is strongest on Southern Europe with regard to wage growth interdependencies. However, the situation is inverted with regard to the development of nominal unit labour costs where the German influence on Southern Europe is substantially weaker than on neighbouring economies. Copyright The Author 2012. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved., Oxford University Press.

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  • Paul Ramskogler, 2012. "Is there a European wage leader? Wage spillovers in the European Monetary Union," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 36(4), pages 941-962.
    • Handle: RePEc:oup:cambje:v:36:y:2012:i:4:p:941-962
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    File URL: http://hdl.handle.net/10.1093/cje/bes003
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    Cited by:

    1. Aleksandra Parteka & Joanna Wolszczak-Derlacz, 2015. "Integrated sectors - diversified earnings: the (missing) impact of offshoring on wages and wage convergence in the EU27," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 13(3), pages 325-350, September.
    2. Andreas Wörgötter & Sihle Nomdebevana, 2020. "Aggregate Public-Private Remuneration Patterns in South Africa," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 48(4), pages 461-474, December.
    3. Andreas Wörgötter & Sihle Nomdebevana, 2019. "Aggregate and sectoral public-private remuneration patterns in South Africa," Working Papers 786, Economic Research Southern Africa.
    4. Loewald, Christopher & Wörgötter, Andreas, 2019. "Do monetary unions dream of structural reforms?," ECON WPS - Working Papers in Economic Theory and Policy 01/2019, TU Wien, Institute of Statistics and Mathematical Methods in Economics, Economics Research Unit.
    5. Paul Ramskogler, 2013. "The National–Transnational Wage-Setting Nexus in Europe: What have We Learned from the Early Years of Monetary Integration?," Journal of Common Market Studies, Wiley Blackwell, vol. 51(5), pages 916-930, September.

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