Europeanization or Globalization? Transnational Wage Bargaining and the Distribution of Activity in European Labor Markets
This paper investigates the impact of increasing globalization on labor markets, in terms of wage inflation and the distribution of activity across regions. Specifically, we study the effects of aggregation in the labor markets on the distribution of employment and inflationary pressures, where there are differences in market structures and transmission mechanisms underpinned by relatively immobile labor. To demonstrate these ideas, we take the European experience as a â€œlaboratory to show what can be expected from globalization in the labor markets in practice. Using models of wage leadership vs. locational competition, we examine the extent and strength of aggregation effects on labor market costs using a sample of data from 1983 to 2007 which covers the period of the creation of the Euro. We find that the aggregation effect has decreased significantly since the start of EMU, thereby improving the tradeoff between inflation and unemployment. At the same time, while Germany played an important role in the run-up to EMU in terms of wage leader, its role has now decreased and been replaced by globalization forces. This has led to increased locational competition in terms of wage formation. We demonstrate this with the emerging role of the US as the benchmark for wage setting in Europe.
|Date of creation:||Nov 2008|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.dnb.nl/en/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- De Grauwe, Paul, 1989. "Is the European Monetary System a DM-Zone?," CEPR Discussion Papers 297, C.E.P.R. Discussion Papers.
- Thirlwall, A P, 1970. "Regional Phillips Curves," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 32(1), pages 19-32, February.
- Diego Puga, 1996.
"The Rise and Fall of Regional Inequalities,"
CEP Discussion Papers
dp0314, Centre for Economic Performance, LSE.
- Rudd, Jeremy & Whelan, Karl, 2003.
"Can Rational Expectations Sticky-Price Models Explain Inflation Dynamics,"
Research Technical Papers
5/RT/03, Central Bank of Ireland.
- Jeremy Rudd & Karl Whelan, 2006. "Can Rational Expectations Sticky-Price Models Explain Inflation Dynamics?," American Economic Review, American Economic Association, vol. 96(1), pages 303-320, March.
- Karl Whelan & Jeremy Rudd, 2003. "Can Rational Expectations Sticky-Price Models Explain Inflation Dynamics?," Computing in Economics and Finance 2003 181, Society for Computational Economics.
- Jeremy Rudd & Karl Whelan, 2003. "Can rational expectations sticky-price models explain inflation dynamics?," Finance and Economics Discussion Series 2003-46, Board of Governors of the Federal Reserve System (U.S.).
- Demertzis, Maria & Hallett, Andrew Hughes, 1998. "Asymmetric transmission mechanisms and the rise in European unemployment: A case of structural differences or of policy failures?," Journal of Economic Dynamics and Control, Elsevier, vol. 22(6), pages 869-886, June.
- M. Demertzis & A. Hughes Hallett, 2000.
"Wage Inflation and the Distribution of Output Gaps in Europe: Insiders vs. Outsiders,"
WO Research Memoranda (discontinued)
631, Netherlands Central Bank, Research Department.
- M. Demertzis & A.J. Huges Hallett, 2001. "Wage Inflation and the Distribution of Output Gaps in Europe: Insidersvs. Outsiders," DNB Staff Reports (discontinued) 59, Netherlands Central Bank.
- Hughes Hallett, A J & Ma, Yue, 1993. "East Germany, West Germany, and Their Mezzogiorno Problem: A Parable for European Economic Integration," Economic Journal, Royal Economic Society, vol. 103(417), pages 416-28, March.
- Brechling, Frank, 1973. "Wage Inflation and the Structure of Regional Unemployment," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 5(1), pages 355-79, Part II F.
- Richard B. Freeman, 1995. "Are Your Wages Set in Beijing?," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 15-32, Summer.
- repec:cup:cbooks:9780521483308 is not listed on IDEAS
- Bhaskar, V, 1990. "Wage Relativities and the Natural Range of Unemployment," Economic Journal, Royal Economic Society, vol. 100(400), pages 60-66, Supplemen.
- Hallett, A.J. Hughes, 2000. "Aggregate Phillips Curves Are Not Always Vertical: Heterogeneity And Mismatch In Multiregion Or Multisector Economies," Macroeconomic Dynamics, Cambridge University Press, vol. 4(04), pages 534-546, December.
- Michael Artis & Dilip Nachane, 1990.
"Wages and prices in Europe: A test of the German leadership thesis,"
Review of World Economics (Weltwirtschaftliches Archiv),
Springer, vol. 126(1), pages 59-77, March.
- Artis, Michael J & Nachane, Dilip M, 1989. "Wages and Prices in Europe: A Test of the German Leadership Thesis," CEPR Discussion Papers 296, C.E.P.R. Discussion Papers.
- Edward H. Gardner & William R. M. Perraudin, 1993. "Asymmetry in the ERM: A Case Study of French and German Interest Rates Before and After German Unification," IMF Staff Papers, Palgrave Macmillan, vol. 40(2), pages 427-450, June.
- Hughes Hallett, Andrew & Ma, Yue & Melitz, Jacques, 1994.
"Unification and the Policy Predicament in Germany,"
CEPR Discussion Papers
956, C.E.P.R. Discussion Papers.
- Fratianni, Michele & von Hagen, Juergen, 1990. "The European Monetary System ten years after," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 32(1), pages 173-241, January.
- Artis, Michael J & Ormerod, Paul, 1991. "Is There an `EMS' Effect in European Labour Markets?," CEPR Discussion Papers 598, C.E.P.R. Discussion Papers.
- Maria Demertzis & Andrew Hallett & Ole Rummel, 2000. "Is the European union a natural currency area, or is it held together by policy makers?," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 136(4), pages 657-679, December.
When requesting a correction, please mention this item's handle: RePEc:dnb:dnbwpp:186. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Rob Vet)
If references are entirely missing, you can add them using this form.