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Wage Setters, Central Bank Conservatism and Economic Performance


  • Clemente De Lucia

    (ISAE - Institute for Studies and Economic Analyses)


This work analyses the relationship among wage setters, Central Bank conservatism and economic performance. The main findings are that we can not confirm the so called Calmfors-Driffill effect. Key parameter is the elasticity of substitution between labor types, or , which affects the unions' market power. It emerges that with high values of decentralized economies, rather than centralized ones, face lower levels of inflation and unemployment. The opposite occurs with low values of . Dealing with the conservatism of the Central Bank, the paper shows that an ultra conservative central banker, rather than a populist one is able to maximize the welfare of a society.

Suggested Citation

  • Clemente De Lucia, 2003. "Wage Setters, Central Bank Conservatism and Economic Performance," ISAE Working Papers 34, ISTAT - Italian National Institute of Statistics - (Rome, ITALY).
  • Handle: RePEc:isa:wpaper:34

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    References listed on IDEAS

    1. Francesco Lippi, 2003. "Strategic Monetary Policy with Non-Atomistic Wage Setters," Review of Economic Studies, Oxford University Press, vol. 70(4), pages 909-919.
    2. Holden, Steinar, 2005. "Monetary regimes and the co-ordination of wage setting," European Economic Review, Elsevier, vol. 49(4), pages 833-843, May.
    3. Jerger, Jurgen, 2002. "How strong is the case for a populist central banker? A note," European Economic Review, Elsevier, vol. 46(3), pages 623-632, March.
    4. Fabrizio Coricelli & Alex Cukierman & Alberto Dalmazzo, 2006. "Monetary Institutions, Monopolistic Competition, Unionized Labor Markets and Economic Performance," Scandinavian Journal of Economics, Wiley Blackwell, vol. 108(1), pages 39-63, March.
    5. Obstfeld, Maurice & Rogoff, Kenneth, 2000. "New directions for stochastic open economy models," Journal of International Economics, Elsevier, vol. 50(1), pages 117-153, February.
    6. Lippi, Francesco, 2002. "Revisiting the case for a populist central banker," European Economic Review, Elsevier, vol. 46(3), pages 601-612, March.
    7. Coricelli, Fabrizio & Cukierman, Alex & Dalmazzo, Alberto, 2001. "Economic Performance and Stabilization Policy in a Monetary Union with Imperfect Labour and Goods Markets," CEPR Discussion Papers 2745, C.E.P.R. Discussion Papers.
    8. David Soskice & Torben Iversen, 2000. "The Nonneutrality of Monetary Policy with Large Price or Wage Setters," The Quarterly Journal of Economics, Oxford University Press, vol. 115(1), pages 265-284.
    9. Heiner, Ronald A, 1983. "The Origin of Predictable Behavior," American Economic Review, American Economic Association, vol. 73(4), pages 560-595, September.
    10. Cukierman, Alex & Lippi, Francesco, 1999. "Central bank independence, centralization of wage bargaining, inflation and unemployment:: Theory and some evidence," European Economic Review, Elsevier, vol. 43(7), pages 1395-1434, June.
    11. GalĂ­, Jordi, 2002. "New Perspectives on Monetary Policy, Inflation and the Business Cycle," CEPR Discussion Papers 3210, C.E.P.R. Discussion Papers.
    12. Cubitt, Robin P, 1995. " Corporatism, Monetary Policy and Macroeconomic Performance: A Simple Game Theoretic Analysis," Scandinavian Journal of Economics, Wiley Blackwell, vol. 97(2), pages 245-259, June.
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    Key Words: Non Atomistic Agents; Conservatism; Wage Bargaining;

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • J5 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining


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