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Does the Dispersion of Unit Labor Cost Dynamics in the EMU Imply Long-run Divergence? Results from a Comparison with the United States of America and Germany

Author

Listed:
  • Sebastian Dullien

    () (Financial Times Deutschland)

  • Ulrich Fritsche

    () (Department for Economics and Politics, University of Hamburg, and DIW Berlin)

Abstract

Using unit labor cost (ULC) data from Euro area countries as well as US States and German Laender we investigate inflation convergence using different approaches, namely panel unit root tests, cointegration tests and error-correction models. All in all we cannot reject convergence of ULC growth in EMU, however, country-specific deviations from the rest of the currency union are more pronounced in Europe and more persistent. This holds before and after the introduction of the common currency.

Suggested Citation

  • Sebastian Dullien & Ulrich Fritsche, 2007. "Does the Dispersion of Unit Labor Cost Dynamics in the EMU Imply Long-run Divergence? Results from a Comparison with the United States of America and Germany," Macroeconomics and Finance Series 200702, Hamburg University, Department Wirtschaft und Politik.
  • Handle: RePEc:hep:macppr:200702
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Ulrich Fritsche & Vladimir Kuzin, 2011. "Analysing convergence in Europe using the non-linear single factor model," Empirical Economics, Springer, pages 343-369.
    2. Buscher, Herbert S. & Gabrisch, Hubert, 2009. "Is the European Monetary Union an Endogenous Currency Area? The Example of the Labor Markets," IWH Discussion Papers 7/2009, Halle Institute for Economic Research (IWH).
    3. Helmut Herwartz & Florian Siedenburg, 2013. "To converge or not converge: unit labor cost inflation in the Euro area," Empirical Economics, Springer, pages 455-467.
    4. Francesca Pancotto & Filippo Pericoli, 2011. "Till Labor Cost Do Us Part A Vecm Model of Unit Labor Cost Convergence in the Euro Area," Working Papers 14, Doctoral School of Economics, Sapienza University of Rome, revised 2011.
    5. Nicolas Canry & Arnaud Lechevalier, 2006. "Wage share variations in France and Germany since 1970: what does really matter?," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00140529, HAL.

    More about this item

    Keywords

    Unit labor costs; inflation; EMU; convergence; panel unit root tests; convergence clubs;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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