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How flexible are real wages in EU countries? A panel investigation

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  • Rusinova, Desislava
  • Lipatov, Vilen
  • Heinz, Frigyes Ferdinand

Abstract

We estimate the degree of real wage flexibility in 19 EU countries in a wage Phillips curve panel framework. We find evidence for a reaction of wage growth to unemployment and productivity growth. The degree of real wage flexibility tends to be larger in the central and eastern European (CEE) countries than in the euro area; weaker in downturns than during upswings. There exists an inflation threshold, below which real wage flexibility is low. We also find that a part of the heterogeneity in real wage flexibility and unemployment may be related to differences in the wage bargaining institutions.

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  • Rusinova, Desislava & Lipatov, Vilen & Heinz, Frigyes Ferdinand, 2015. "How flexible are real wages in EU countries? A panel investigation," Journal of Macroeconomics, Elsevier, vol. 43(C), pages 140-154.
    • Handle: RePEc:eee:jmacro:v:43:y:2015:i:c:p:140-154
    DOI: 10.1016/j.jmacro.2014.10.002
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    Cited by:

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    3. Lukas Lehner & Paul Ramskogler & Aleksandra Riedl, 2024. "Beggaring Thy Co-Worker: Labor Market Dualization and the Wage Growth Slowdown in Europe," ILR Review, Cornell University, ILR School, vol. 77(5), pages 659-684, October.
    4. Robert Anderton & Arno Hantzsche & Simon Savsek & Máté Tóth, 2017. "Sectoral Wage Rigidities and Labour and Product Market Institutions in the Euro Area," Open Economies Review, Springer, vol. 28(5), pages 923-965, November.
    5. Padang Wicaksono & Yulial Hikmah & Rayinda Nur Ilmiawani, 2023. "Productivity and Global Value Chains: A Tale from the Indonesian Automobile Sector," Economies, MDPI, vol. 11(10), pages 1-12, October.
    6. A. Moutaabbid, 2024. "Les determinants de la dynamique des salaires en France : approches macro et sectorielles par la courbe de Phillips," Documents de Travail de l'Insee - INSEE Working Papers 2024-20, Institut National de la Statistique et des Etudes Economiques.
    7. Lehner, Lukas & Ramskogler, Paul & Riedl, Aleksandra, 2022. "Begging thy coworker – Labor market dualization and the slow-down of wage growth in Europe," INET Oxford Working Papers 2022-04, Institute for New Economic Thinking at the Oxford Martin School, University of Oxford.

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    More about this item

    Keywords

    Real wage flexibility; Phillips curve; Labour market institutions; Unemployment; Inflation; Productivity;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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