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Relative Wages in Monetary Union and Floating

  • Vartiainen, Juhana

    (Trade Union Institute for Economic Research)

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    We analyse a small open economy with a tradable and a sheltered sector. If the unions that operate in each sector coordinate their wage demands sectorwise, the choice of monetary regime - floating cum inflation target vs EMU - may affect the relative wages and prices of the economy. We show that EMU results in lower prices for tradable goods and lower real wages in the traded sector while opposite results hold for sheltered sector prices and wages. Thus, if large unions behave strategically, the choice of monetary regime has far-reaching structural implications.

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    Paper provided by Trade Union Institute for Economic Research in its series Working Paper Series with number 155.

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    Length: 20 pages
    Date of creation: 04 Nov 1999
    Date of revision:
    Publication status: Published in Scandinavian Journal of Economics, 2002, pages 277-287.
    Handle: RePEc:hhs:fiefwp:0155
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    1. Steinar Holden, 2003. "Wage-setting under Different Monetary Regimes," Economica, London School of Economics and Political Science, vol. 70(278), pages 251-265, 05.
    2. Rama, Martin, 1994. "Bargaining structure and economic performance in the open economy," European Economic Review, Elsevier, vol. 38(2), pages 403-415, February.
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