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Wage Determination in Economies in Transition: Ireland Spain and Portugal

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  • John FitzGerald

    (Economic and Social Research Institute (ESRI))

Abstract

This paper considers the experience of three existing member states and how the process of convergence has affected, and in turn been affected by, the performance of their labour markets. It concentrates on the process of wage determination in three countries Ireland, Spain and Portugal. In the case of Ireland, while EU membership occurred in 1973, the process of transition began around 1960 and has continued over a protracted period of forty years. For Portugal and Spain the process has been more concentrated. Liberalisation and democratisation of their economies took place in the 1970s and EU membership occurred in 1986. The changes that took place in these societies affected the labour market both directly and indirectly. In this paper we consider how the process of transition, including freeing of trade and EU membership, has affected both the demand for labour and the supply of labour. In the case of labour supply the role of trade unions has changed, with direct implications for the wage bargaining process itself. EU membership has also opened up the possibility of migration affecting labour supply. On the demand side, membership of the EU and the completion of the Single Market have changed the focus for many of the firms operating in these previously rather closed economies. Today firms producing tradable goods and services are competing in a global market and this has important implications for the factors driving their demand for labour. In Section 2 of this paper we examine the movement of wage rates over the period of convergence. In Section 3 we set out models of wage determination that allow for new effects on wage determination arising from the EU integration process. Section 4 describes the results obtained from estimating these models using data for Ireland, Spain and Portugal. Conclusions are discussed in Section 5.

Suggested Citation

  • John FitzGerald, 2001. "Wage Determination in Economies in Transition: Ireland Spain and Portugal," Papers WP141, Economic and Social Research Institute (ESRI).
  • Handle: RePEc:esr:wpaper:wp141
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    References listed on IDEAS

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    11. John Curtis & John FitzGerald, 1994. "Convergence in an Open Labour Market," Papers WP045, Economic and Social Research Institute (ESRI).
    12. repec:crs:wpaper:9645 is not listed on IDEAS
    13. Olympia Bover & Pilar García-Perea & Pedro Portugal, 2000. "Labour market outliers: Lessons from Portugal and Spain," Economic Policy, CEPR;CES;MSH, vol. 15(31), pages 379-428, October.
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    Cited by:

    1. FitzGerald, John & Bergin, Adele & Conefrey, Thomas & Diffney, Sean & Duffy, David & Kearney, Ide & Lyons, Sean & Malaguzzi Valeri, Laura & Mayor, Karen & Richard S. J. Tol, 2008. "Medium-Term Review 2008-2015, No. 11," Forecasting Report, Economic and Social Research Institute (ESRI), number MTR11, April.
    2. Slevin, Geraldine, 2002. "Is There a "New Economy" in Ireland?," Research Technical Papers 3/RT/02, Central Bank of Ireland.
    3. Slevin, Geraldine, 2001. "Potential Output and the Output Gap in Ireland," Research Technical Papers 5/RT/01, Central Bank of Ireland.
    4. Sebastian Dellepiane & Niamh Hardiman, 2012. "Fiscal Politics In Time: Pathways to Fiscal Consolidation, 1980-2012," Working Papers 201228, Geary Institute, University College Dublin.
    5. Pablo Agnese & Pablo Salvador, 2012. "More alike than different: the Spanish and Irish labour markets before and after the crisis," IZA Journal of European Labor Studies, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 1(1), pages 1-24, December.
    6. John Fitz Gerald, 2006. "Lessons from 20 Years of Cohesion," Chapters,in: Competitiveness and Growth in Europe, chapter 4 Edward Elgar Publishing.

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