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Openness, centralized wage bargaining, and inflation
- Source :
- European Journal of Political Economy. 22:969-988
- Publication Year :
- 2006
- Publisher :
- Elsevier BV, 2006.
-
Abstract
- This paper develops a model of an open economy containing both sectors in which wages are market-determined and sectors with wage-setting arrangements. A portion of the latter group of sectors coordinate their wages, taking into account that their collective actions influence the equilibrium inflation outcome in an environment in which the central bank engages in discretionary monetary policymaking. Key predictions forthcoming from this model are (1) increased centralization of wage setting initially causes inflation to increase at low degrees of wage centralization but then, as wage centralization increases, results in an inflation drop-off; (2) a greater degree of centralized wage setting reduces the inflation-restraining effect of greater central bank independence; and (3) increased openness is more likely to reduce inflation in nations with less centralized wage bargaining. Analysis of data for seventeen nations for the period 1970–1999 provides generally robust empirical support for all three of these predictions.
- Subjects :
- Inflation
Economics and Econometrics
Labour economics
media_common.quotation_subject
Wage
jel:E31
jel:F41
Outcome (game theory)
Independence
Empirical research
Openness, Centralized wage setting, inflation
Efficiency wage
Political Science and International Relations
Economics
Openness to experience
Open economy
media_common
Subjects
Details
- ISSN :
- 01762680
- Volume :
- 22
- Database :
- OpenAIRE
- Journal :
- European Journal of Political Economy
- Accession number :
- edsair.doi.dedup.....bf769155f67af0f37d9e6975e2799b1c