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Wage-Price Setting in New EU Member States

Author

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  • Manuela Goretti

Abstract

This paper analyzes wage- and price-setting relations in new EU member countries. Panel estimates indicate a strong and significant relationship between real wages and labor productivity, as well as evidence of wage pass-through to inflation. Terms of trade shocks do not feed through to real wages. Country-specific wage developments, beyond differences in labor productivity growth, are mostly explained by real wage catch-up from different initial levels and different labor market conditions. Qualitative evidence also suggests that public sector wage demonstration effects and institutional factors may play a role in wage determination.

Suggested Citation

  • Manuela Goretti, 2008. "Wage-Price Setting in New EU Member States," IMF Working Papers 08/243, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:08/243
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    References listed on IDEAS

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    1. Olivier J. Blanchard, 1986. "The Wage Price Spiral," The Quarterly Journal of Economics, Oxford University Press, vol. 101(3), pages 543-565.
    2. Ian Babetskii, 2006. "Aggregate Wage Flexibility in Selected New EU Member States," Working Papers 2006/1, Czech National Bank, Research Department.
    3. Feldstein, Martin, 2008. "Did Wages Reflect Growth in Productivity?," Scholarly Articles 2794832, Harvard University Department of Economics.
    4. Lawrence F. Katz & Olivier Blanchard, 1999. "Wage Dynamics: Reconciling Theory and Evidence," American Economic Review, American Economic Association, vol. 89(2), pages 69-74, May.
    5. Feldstein, Martin, 2008. "Did wages reflect growth in productivity?," Journal of Policy Modeling, Elsevier, vol. 30(4), pages 591-594.
    6. Barry Bosworth & George L. Perry, 1994. "Productivity and Real Wages: Is There a Puzzle?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 25(1), pages 317-343.
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    Citations

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    Cited by:

    1. Ansgar Belke & Gunther Schnabl & Holger Zemanek, 2013. "Real Convergence, Capital Flows, and Competitiveness in Central and Eastern Europe," Review of International Economics, Wiley Blackwell, vol. 21(5), pages 886-900, November.
    2. International Monetary Fund, 2016. "Cross-Country Report on Minimum Wages; Selected Issues," IMF Staff Country Reports 16/151, International Monetary Fund.
    3. Adriatik Hoxha, 2016. "The Wage-Price Setting Behavior: Comparing The Evidence from EU28 and EMU," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 19(60), pages 61-102, June.
    4. Lupu, Dan, 2012. "Public sector pay policy in East European countries," MPRA Paper 37720, University Library of Munich, Germany.
    5. repec:kap:empiri:v:45:y:2018:i:2:d:10.1007_s10663-017-9366-6 is not listed on IDEAS
    6. Ines Kersan-Škabić, 2016. "Is Internal Devaluation Policy In The Eu Effective?," Economic Annals, Faculty of Economics, University of Belgrade, vol. 61(211), pages 29-46, October -.
    7. Ansgar Belke & Ulrich Haskamp & Gunther Schnabl, 2018. "Beyond Balassa and Samuelson: real convergence, capital flows, and competitiveness in Greece," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 45(2), pages 409-424, May.
    8. Hoxha Adriatik, 2010. "Causal relationship between prices and wages: VECM analysis for Germany," EuroEconomica, Danubius University of Galati, issue 26, pages 90-106, November.
    9. Schnabl, Gunther & Ziegler, Christina, 2011. "Exchange rate and wage policies in Central and Eastern Europe," Journal of Policy Modeling, Elsevier, vol. 33(3), pages 347-360, May.
    10. Aretz, Bodo & Busl, Claudia & Gürtzgen, Nicole & Hogrefe, Jan & Kappler, Marcus & Steffes, Susanne & Westerheide, Peter, 2009. "Endbericht zum Forschungsauftrag fe 13/08: "Ursachenanalyse der Verschiebung in der funktionalen Einkommensverteilung in Deutschland" (Aktenzeichen I A 3 - Vw 3170/08/10035)," ZEW Expertises, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research, number 110510.
    11. Adriatik Hoxha, 2010. "Causality between Prices and Wages: VECM Analysis for EU-27," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 13(37), pages 3-38, September.
    12. Gunther Schnabl & Christina Ziegler, 2008. "Exchange Rate Regime and Wage Determination in Central and Eastern Europe," CESifo Working Paper Series 2471, CESifo Group Munich.

    More about this item

    Keywords

    External shocks; Europe; European Union; Inflation; Labor productivity; Labor markets; Public sector wages; Pricing policy; Wage policy; Wage; Price; Labor Market; New EU Member States; wages; labor costs;

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