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The State of Wage Convergence in the European Monetary Union

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  • Paul Ramskogler

    () (Department of Economics, Vienna University of Economics & B.A.)

Abstract

Before the introduction of the Euro many observers had expected an increase of inflationary pressures due to a de-coordination-shock to national wage bargaining. However, if anything systematically happened after the introduction of the Euro wage restraint increased (Posen and Gould 2006). A possible explanation for this finding is that a system of pattern bargaining has emerged with Germany figuring as a “centre of gravity” for European wage bargains (Traxler et al. 2008, Traxler and Brandl 2009). This paper studies wage and nominal unit labour cost spill-overs for the EMU for a panel over 13 manufacturing sectors from 1992-2005 and quantifies the effects of different countries. It turns out that there are strong interdependencies across EMU-members with regard to nominal wage growth. Indeed, a leading role accrues to Germany whose wage developments are twice as influential as those of the next important countries. Remarkably, the strong interdependence of wage growth is not reflected with regard to unit labour costs. Here, only the development in a core group composed of Austria, France, Germany and the Netherlands, is bound to each other. The development of nominal unit labour costs in other countries is largely independent from each other and especially from this core group.

Suggested Citation

  • Paul Ramskogler, 2010. "The State of Wage Convergence in the European Monetary Union," Department of Economics Working Papers wuwp130, Vienna University of Economics and Business, Department of Economics.
  • Handle: RePEc:wiw:wiwwuw:wuwp130
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    Cited by:

    1. Aleksandra Parteka & Joanna Wolszczak-Derlacz, 2015. "Integrated sectors - diversified earnings: the (missing) impact of offshoring on wages and wage convergence in the EU27," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 13(3), pages 325-350, September.
    2. Gabor Oblath & Eva Palocz & David Popper & Akos Valentinyi, 2015. "Economic convergence and structural change in the new member states of the European Union Convergence in volumes, prices and the share of services, with implications for wage convergence: an expenditu," IEHAS Discussion Papers 1544, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.

    More about this item

    JEL classification:

    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J52 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Dispute Resolution: Strikes, Arbitration, and Mediation
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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