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Relative Wages in Monetary Union and Floating

Author

Listed:
  • Juhana Vartiainen

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

  • Juhana Vartiainen, 1999. "Relative Wages in Monetary Union and Floating," Working Papers 156, Työn ja talouden tutkimus LABORE, Labour Institute for Economic Research LABORE.
    • Handle: RePEc:pst:wpaper:156
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    File URL: https://labore.fi/wp-content/uploads/1999/01/Tutkimusselosteita-156.pdf
    File Function: First version, 1999
    Download Restriction: no
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    More about this item

    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
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Systems; Standards; Regimes; Government and the Monetary System
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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