Has the EMU Reduced Wage Growth and Unemployment? Testing a Model of Trade Union Behaviour
Open access
Date
2011-04Type
- Working Paper
ETH Bibliography
yes
Altmetrics
Abstract
By using a model of trade union behaviour Grüner (2010) argues that the introduction of the European Monetary Union (EMU) led to lower wage growth and lower unemployment in participating countries. Following Grüner’s model, monetary centralization lets the central bank react less flexibly to national business cycle movements. This increases the amplitude of national business cycles which, in turn, leads to higher unemployment risk. In order to counter-balance this effect, trade unions lower their claims for wage mark-ups resulting in lower wage growth and lower unemployment. This paper uses macroeconomic data on OECD countries and a difference-in-differences approach to empirically test the implications of this model. Although we come up with some weak evidence for increased business cycle amplitudes within the EMU, we neither find a significant general effect of the EMU on wage growth nor on unemployment. Show more
Permanent link
https://doi.org/10.3929/ethz-a-006435838Publication status
publishedJournal / series
KOF Working PapersVolume
Publisher
KOF Swiss Economic Institute, ETH ZurichSubject
LOHNHÖHE; WÄHRUNGSZONEN; UNEMPLOYMENT; CURRENCY AREAS; MONETARY POLICY; EUROPÄISCHES WÄHRUNGSSYSTEM + EUROPÄISCHE WÄHRUNGSUNION; MAKROÖKONOMISCHE MODELLE (OPERATIONS RESEARCH); ARBEITSLOSIGKEIT; SALARY LEVELS; EUROPEAN MONETARY SYSTEM + EUROPEAN MONETARY UNION; GELDPOLITIK; MACROECONOMIC MODELS (OPERATIONS RESEARCH)Organisational unit
02525 - KOF Konjunkturforschungsstelle / KOF Swiss Economic Institute
More
Show all metadata
ETH Bibliography
yes
Altmetrics