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Sectorial Asymmetry and the Centralisation of the Wage Determination in an Open Economy

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  • Wibaut, Quentin

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))

Abstract

The aim of the present article is to highlight the importance role played by the incentive constraints flowing from the presence of asymmetric agents in the wage centralization context. I propose an asymmetric model that includes the model of Calmfors and Driffill (1988) and the two country extension of Danthinne and Hunt (1994) (DH) as polar cases. The asymmetry consists of distinguishing a sheltered and a tradable sector in both countries. I consider the modification entailed by an incentive compatible centralisation relatively to an utilitarist aggregation of the two national sectors for different degree of asymmetry. The result and the policy implications are noticeably different from the two precedent models. (i) When the incentive constraint is taken account for, the gains resulting from a national (versus sectoral) centralisation are not always very noticeable. (ii) Contrarily to the DH prescription, a larger degree of economic integration does not lead to better economic performance (in term of unemployment rate).

Suggested Citation

  • Wibaut, Quentin, 1995. "Sectorial Asymmetry and the Centralisation of the Wage Determination in an Open Economy," LIDAM Discussion Papers IRES 1995029, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    • Handle: RePEc:ctl:louvir:1995029
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    Cited by:

    1. Kent Friberg, 2007. "Intersectoral wage linkages: the case of Sweden," Empirical Economics, Springer, vol. 32(1), pages 161-184, April.

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