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Relative Wages in Monetary Union and Floating

Author

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  • Vartiainen, Juhana

    (Trade Union Institute for Economic Research)

Abstract

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.

Suggested Citation

  • Vartiainen, Juhana, 1999. "Relative Wages in Monetary Union and Floating," Working Paper Series 155, Trade Union Institute for Economic Research.
    • Handle: RePEc:hhs:fiefwp:0155
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    File URL: http://swopec.hhs.se/fiefwp/papers/WP155.pdf
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    References listed on IDEAS

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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, May.
    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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    Cited by:

    1. Holden, Steinar, 2005. "Monetary regimes and the co-ordination of wage setting," European Economic Review, Elsevier, vol. 49(4), pages 833-843, May.
    2. Steinar Holden, 2003. "Wage-setting under Different Monetary Regimes," Economica, London School of Economics and Political Science, vol. 70(278), pages 251-265, May.

    More about this item

    Keywords

    Trade unions; Wage bargaining; EMU; Monetary policy;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets

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