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Monetary Regimes and the Co-Ordination of Wage Setting

  • Steinar Holden

International comparisons show that countries with co-ordinated wage setting generally have lower unemployment than countries with less co-ordinated wage setting. This paper argues that the monetary regime may affect whether co-ordination among many wage setters is feasible. A strict monetary regime, like a country-specific inflation target, to some extent disciplines wage setters, so that the consequences of uncoordinated wage setting are less detrimental than under a more passive monetary regime (eg a monetary union). Thus, the gains from co-ordination are larger under a passive regime. Under some circumstances a passive regime may induce co-operation in wage setting, and thus lower unemployment, when a stricter regime would not.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 429.

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Date of creation: 2001
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Handle: RePEc:ces:ceswps:_429
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  26. Holden, S., 1991. "Economic Policy in an Economy with Local and Central Wage Bargaining," Memorandum 08/1991, Oslo University, Department of Economics.
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