Department of Economics Working Papers
Vienna University of Economics and Business Administration
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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. Keywords: wage spill-overs, wage coordination,
collective bargaining, EMU
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General
Correspondence
Gerlinde Fellner
Vienna University of Economics & B.A.
Department of Economics
Augasse 2 - 6, A - 1090 Vienna, Austria
Last Update 20-July-