Peeters, Marga and Den Reijer, Ard (2012): On wage formation, wage flexibility and wage coordination : A focus on the nominal wage impact of productivity in Germany, Greece, Ireland, Portugal, Spain and the United States.
This is the latest version of this item.
Download (1261Kb) | Preview
This paper discusses the endeavours of policy makers to come to some degree of wage coordination among EU countries, aiming at aligning wage growth with labour productivity growth at the national levels. In this context, we analyse the wage and productivity developments in Germany, the European Union’s periphery countries Greece, Ireland, Portugal, and Spain along with the US for the period 1980-2010. Apart from the contribution of productivity to wages, we take into account the contributions of prices, unemployment, replacement rates and taxes by means of an econometrically estimated non-linear wage equation resulting from a wage bargaining model. We further study the downward rigidities of wages in depth. The findings show that in past times of low productivity, price inflation and reductions in unemployment put significant upward pressure on wage growth, also in the low inflationary period of the 2000s. Greece, Ireland, Portugal and Spain are far from aligning wage growth with productivity growth. German productivity is a major German wage determinant, but surely not the only one. To steer wages, policy makers can effectively use the replacement rate.
|Item Type:||MPRA Paper|
|Original Title:||On wage formation, wage flexibility and wage coordination : A focus on the nominal wage impact of productivity in Germany, Greece, Ireland, Portugal, Spain and the United States|
|Keywords:||wages; compensation per employee; unit labour costs; productivity; wage formation; wage coordination; labour market; wage flexibility; unemployment; prices; replacement rate; monetary union;|
|Subjects:||E - Macroeconomics and Monetary Economics > E2 - Macroeconomics: Consumption, Saving, Production, Employment, and Investment > E24 - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital
J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs
E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit
C - Mathematical and Quantitative Methods > C2 - Single Equation Models; Single Variables > C22 - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, Macroeconomic Policy, and General Outlook
|Depositing User:||Marga (H.M.M.) Peeters|
|Date Deposited:||06. Jan 2012 09:32|
|Last Modified:||12. Feb 2013 13:05|
Acocella, Nicola and Giovanni Bartolomeo, 2004, Is a conservative central banker a (perfect) substitute for wage coordination? Empirica 31(2):281-294.
Addison, John T., Mário Centeno and Pedro Portugal, 2008, Do reservation wages really decline? Some international evidence on the determinants of reservation wages, Banco de Portugal Working Papers 2.
Arpaia, Alfonso and Karl Pichelmann, 2007, Nominal and real wage flexibility in EMU, European Economy Economic Papers no 281.
Barrell, Ray and Karen Dury, 2001, Asymmetric labour markets in a converging Europe: Do differences matter?, European Network of Economic Policy Research Institutes Working Paper 2.
Bell, Brian, Stephen Nickell and Glenda Quintini, 2002, Wage Equations, wage curves and all that, Labour Economics 9(3):341-360.
Bentolila, Samuel and Gilles Saint-Paul, 2003, Explaining movements in the labor share, Contributions to macroeconomics, Berkeley Electronic Press 3(1) article 9.
Bentolila, Samuel, Pierre Cahuc, Juan J. Dolado and Thomas le Barbanchon, 2010, Two-tier labor markets in the great recession : France versus Spain, CEMFI Working paper no 1009.
Borghijs, Alain, Sjef Ederveen and Ruud de Mooij, 2003, European wage coordination: Nightmare or dream to come true?, Central Planning Bureau Discussion Paper no 017.
Boysen-Hogrefe, Jens, Dominik Groll, Wolfgang Lechthaler and Christian Merkl, 2010, The role of labour market institutions in the Great Recession, Applied Economics Quarterly, 61:65-88.
Bover, Olympia, P. García-Perea and P. Portugal, 2000, Labour market outliers: Lessons from Portugal and Spain, Economic Policy, 381-428.
Caballero, R.J. and M.L. Hammour, 1996, On the timing and efficiency of creative destruction, Quarterly Journal of Economics 111(3) 805-52.
Calmfors, Lars, 2001, Macroeconomic policy coordination in the EU: How far should it go?, Swedish Economic Policy Review 8:3-14.
Calmfors, Lars and Åsa Johansson, 2006, Nominal wage flexibility, wage indexation and monetary union, Economic Journal 116:283-308.
Center for Economic Policy Research, 1995, Unemployment: Choices for Europe, Monitoring European Integration 5.
Council of the European Union (Heads of state or government of the euro area meeting), 11 March 2011, Conclusions of the heads of state or government of the euro area of 11 March 2011, Annex 1: A pact for the euro, stronger economic policy coordination for competitiveness and convergence.
De Grauwe, Paul, 2011, The governance of a fragile eurozone, Centre for Economic Policy Studies, Brussels-Belgium, Working Document no 346.
Demertzis, Maria, Peter van Els, Sybille Grob and Marga Peeters, 2006, EUROMON: the multi-country model of De Nederlandsche Bank, DNB Occassional Studies 4(1).
Destefanis, Sergio and Giuseppe Mastromatteo, 2009, Labor-market performance in the OECD: An assessment of recent evidence, Levy Economics Institute Working Paper no 559.
Dickens, William T., Lorenz Götte, Erica L. Groshen, Steinar Holden, Julián Messina, Mark E. Schweizer, Jarkko Turunen and Melanie E. Ward, 2006, How wages change – Micro evidence from the international wage flexibility project, European Central Bank Discussion Paper no 697.
Dreger, Christian and Hans-Eggert Reimers, 2011, On the role of sectoral and national components in the wage bargaining process, Regional and Sectoral Economic Studies 11-1.
Fase, Martin M.G. and Alexander Tieman, 2001, Wage moderation, innovation and labour productivity: myths and facts revisited, De Economist 149:115-127.
Feldstein, Martin S. 2008, Did wages reflect growth in productivity? Journal of Policy Modeling, Elsevier, 30(4):591-594.
Folmer, Kees, 2009, Why do macro wage elasticities diverge? A meta analysis, Central Planning Bureau (CPB) Discussion Paper no 122.
Graafland, Johan and Frederik Huizinga, 1999, Taxes and benefits in a non-linear wage equation, De Economist 147(1):39-54.
Grubb, Dennis, Richard Jackman and Richard Layard, 1983, Wage rigidity and unemployment in OECD countries, European Economic Review, 21, 11-39.
Grüner, Hans Peter and Carsten Hefeker, 1999, How will EMU affect inflation and unemployment in Europe?, Scandinavian Journal of Economics, 101(1), 33-47.
Guisan, Maria-Carmen and Eva Aguayo, 2007, Wages, productivity and human capital in the European Union: Econometric models and comparison with the USA 1985-2005, Applied Econometrics and International Development vol 7(1).
Guisan, Maria-Carmen and Maria Teresa Cancelo, 2006, Employment and productivity in the European Union and comparison with the USA 1985-2005: An analysis of France, Germany, Italy, Spain and the United Kingdom, Applied Econometrics and International Developmentl 6(3):55-63.
Hogen, Vincent, 1999, The determinants of the reservation wage, Centre for Economic Research Working Paper Series 16.
Holden, Steinar and Frederik Wulfsberg, 2008, Downward nominal wage rigidity in the OECD, The B.E. Journal of Macroeconomics, Berkley Electronic Press, 8(1).
Keynes, John M., 1936, The general theory of employment, interest and money, Macmillan Cambridge University Press.
Kleinknecht, Alfred, 2003, Causes of the Dutch job miracle: There is no free lunch!, De Economist 151 329-333.
Layard, Richard, Stephan Nickell and Richard Jackman, 1991, Unemployment: Macroeconomic Performance and the Labour Market, Oxford: Oxford University Press.
Martin, John P., 1996, Measures of replacement rates for the purpose of international comparisons: A note, OECD Economic Studies no 26.
Mastromatteo, Giuseppe and Sergio Destefanis, 2006, Inequality and labour-market performance: A survey beyond an elusive trade-off, University of Salerno Dipartimento di Scienze Economiche e Statistiche Working Paper no 3.176.
Nickell, Stephen and Sushil B. Wadhwani, 1990, Insider forces and wage determination, Economic Journal 100(401):496-509.
Nickell, Stephen, 1997, Unemployment and labor market rigidities: Europe versus North America, Journal of Economic Perspectives 11(3):55-74.
Peeters, Marga and Ard Den Reijer, 2001, On wage formation, wage development and unemployment: The case of Spain, Ireland and the Netherlands , Econometric Research and Special Studies Department Research Memorandum No 677, De Nederlandsche Bank.
Peeters, Marga and Ard den Reijer, 2008, On wage formation, wage development and flexibility: A comparison between European countries and the United States, Applied Econometrics and International Development, 8(1):59-74.
Pichelmann, Karl, 2001, Monitoring wage developments in EMU, Empirica, 28:353-373.
Prasad, Eswar, 2004, What determines the reservation wage of unemployed workers? New evidence of German micro data. in Institutions and wage formation in the new Europe, eds. Gabriel Fagan, Francesco Mongelli and Julian Morgan (Edward Elgar).
Stockhammer, Engelbert, 2008, Wage flexibility or wage coordination? Economic policy implications of the wage led demand regime in the euro area, Intervention – European Journal of Economics and Economic Policies 5(1):54-62.
Van der Welle, Adriaan J. and Frank A.G. den Butter, 2005, Labour market flexibility in the EMU: a policy oriented literature overview (in Dutch: Arbeidsmarktflexibiliteit in de EMU: een beleidsgericht literatuuroverzicht), Kwartaalschrift Economie 4:404-428.
Vanthoor, Wim F.V., 1996, European Monetary Union since 1848 – A political and historical analysis, Edgar Elgar.
Available Versions of this Item
On wage formation, wage flexibility and wage coordination : A focus on the wage impact of productivity in Germany, Greece, Ireland, Portugal, Spain and the United States. (deposited 30. Jun 2011 19:00)
- On wage formation, wage flexibility and wage coordination : A focus on the nominal wage impact of productivity in Germany, Greece, Ireland, Portugal, Spain and the United States. (deposited 06. Jan 2012 09:32) [Currently Displayed]