On Wage Formation, Wage Development and Flexibility: A Comparison between European Countries and the United States

16 Pages Posted: 1 Dec 2008

See all articles by Marga Peeters

Marga Peeters

De Nederlandsche Bank

Ard den Reijer

Sveriges Riksbank - Monetary Policy

Multiple version iconThere are 2 versions of this paper

Date Written: November, 27 2008

Abstract

We derive a non-linear wage equation from a wage bargaining model and estimate an error correction model for Germany, Spain, France, the Netherlands and the US. Based on the estimated parameters, we derive time-varying elasticities of wages with respect to its determinants labour productivity, prices, taxes, unemployment and the replacement rate. Moreover, we quantify the contribution of each determinant to the wage increase. The dominant role of prices in the wage formation in the seventies and eighties was taken over by labour productivity for the US and unemployment in Spain and the Netherlands at the end of the nineties.

Keywords: wage formation, labour market flexibility

JEL Classification: C22, E24, J30

Suggested Citation

Peeters, Marga and den Reijer, Ard, On Wage Formation, Wage Development and Flexibility: A Comparison between European Countries and the United States (November, 27 2008). Applied Econometrics and International Development, Vol. 8, No. 1, 2008, Available at SSRN: https://ssrn.com/abstract=1308249

Marga Peeters (Contact Author)

De Nederlandsche Bank ( email )

PO Box 98
1000 AB Amsterdam
Amsterdam, 1000 AB
Netherlands

Ard den Reijer

Sveriges Riksbank - Monetary Policy ( email )

SE-103 37 Stockholm
Sweden

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