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Competitiveness, Wage Adjustment and Macroeconomic Policy in a Small Open Economy

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  • Alogoskoufis, George

Abstract

In this paper I investigate the relationships between wage adjustment, competitiveness, macroeconomic policy and aggregate fluctuations in a small open economy. Based on a model of an economy producing both traded and non-traded goods, and assuming that the traded goods sector is competitive while the non-traded goods sector is oligopolistic, I show that real wages in the traded goods sector are negatively related with competitiveness. Wage setting is what determines competitiveness, output and inflation, and is pivotal for the effects of macroeconomic policies. The model is estimated and tested for the postwar period, and is used to assess the macroeconomic experience and policy options in Greece.

Suggested Citation

  • Alogoskoufis, George, 1987. "Competitiveness, Wage Adjustment and Macroeconomic Policy in a Small Open Economy," CEPR Discussion Papers 215, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:215
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    Cited by:

    1. Ioannis Kaskarelis, 1991. "Output fluctuations with bargained wages and a competitive tradeable goods sector in the economy: Empirical estimates for the group of five, 1970.1 — 1985.4," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 127(1), pages 42-72, March.
    2. Ioannis Kaskarelis, 1997. "Aggregate returns to scale in Greek manufacturing," Applied Economics, Taylor & Francis Journals, vol. 29(12), pages 1673-1678.

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