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A Wage Policy for External Balance and Employment in EMU Environment: A Theoretical Approach

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  • Sotirios Theodoropoulos

    () (University of Piraeus, Dept of Maritime Studies, Piraeus, Greece)

Abstract

Wage developments and related policies that determine labor markets functioning and wage formation processes, are key factors with central importance in EMU. Flexibility in labor markets functioning and wage-setting aiming to nominal and real wage flexibility, has been the most important policy instrument remaining at national level for responsive national economies and adjustment to shocks. By this paper we analyze the preconditions and importance of a flexible functioning labor market framework, arising from the extended literature and related implemented policies. On the other side of the issue, we discuss the determinants of the conventional wage-setting, as also the main features of the related Scandinavian model and the proposition associated with the new ‘pact for euro’. Aiming to formulate a flexible wage setting framework in EMU, complementary to flexible functioning of labor market, we have to abolish the conventional wage-setting and relay on features contained in the Scandinavian model and the new Europact. We conclude that a flexible wage-setting mechanism should consist of three levels of wage bargaining, servicing different functions and purposes, the nationwide, sectoral and company level. In order to estimate the room or space that is the norm for wage increases in bargaining on the above three levels, we have to rely mainly on productivity developments in competition exposed tradable sectors of the economy. By this policy instrument we aim at assuring competitiveness and external balance, the crucial preconditions for job creation in EMU.

Suggested Citation

  • Sotirios Theodoropoulos, 2011. "A Wage Policy for External Balance and Employment in EMU Environment: A Theoretical Approach," SPOUDAI Journal of Economics and Business, SPOUDAI Journal of Economics and Business, University of Piraeus, vol. 61(3-4), pages 85-102, July - De.
  • Handle: RePEc:spd:journl:v:61:y:2011:i:3-4:p:85-102
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    File URL: http://spoudai.unipi.gr/index.php/spoudai/article/download/28/60/28-143-1-PB.pdf
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    References listed on IDEAS

    as
    1. Alfonso Arpaia & Karl Pichelmann, 2007. "Nominal and real wage flexibility in EMU," International Economics and Economic Policy, Springer, vol. 4(3), pages 299-328, November.
    2. Alberto Alesina & Silvia Ardagna & Roberto Perotti & Fabio Schiantarelli, 2002. "Fiscal Policy, Profits, and Investment," American Economic Review, American Economic Association, vol. 92(3), pages 571-589, June.
    3. Lorenzo E Bernal-Verdugo & Davide Furceri & Dominique Guillaume, 2012. "Labor Market Flexibility and Unemployment: New Empirical Evidence of Static and Dynamic Effects," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 54(2), pages 251-273, June.
    4. Lukas Vogel, 2011. "Structural reforms and external rebalancing in the euro area: a model-based analysis," European Economy - Economic Papers 2008 - 2015 443, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    5. Skedinger, Per, 2011. "Employment Consequences of Employment Protection Legislation," Working Paper Series 865, Research Institute of Industrial Economics.
    6. Calmfors, Lars, 1998. "Macroeconomic Policy, Wage Setting, and Employment--What Difference Does the EMU Make?," Oxford Review of Economic Policy, Oxford University Press, vol. 14(3), pages 125-151, Autumn.
    7. Heinz, Frigyes Ferdinand & Rusinova, Desislava, 2011. "How flexible are real wages in EU countries? A panel investigation," Working Paper Series 1360, European Central Bank.
    8. Feldstein, Martin, 2008. "Did wages reflect growth in productivity?," Journal of Policy Modeling, Elsevier, vol. 30(4), pages 591-594.
    9. repec:hrv:faseco:3353756 is not listed on IDEAS
    10. Feldstein, Martin, 2008. "Did Wages Reflect Growth in Productivity?," Scholarly Articles 2794832, Harvard University Department of Economics.
    11. Peeters, Marga & Den Reijer, Ard, 2011. "On wage formation, wage flexibility and wage coordination : A focus on the wage impact of productivity in Germany, Greece, Ireland, Portugal, Spain and the United States," MPRA Paper 31102, University Library of Munich, Germany.
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    More about this item

    Keywords

    EMU; flexible labor market; wage flexibility; wage formation; wage-setting mechanism; productivity; room for wage increase.;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • F15 - International Economics - - Trade - - - Economic Integration

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