Wage-Price Setting in New EU Member States

Author/Editor:

Manuela Goretti

Publication Date:

October 1, 2008

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper analyzes wage- and price-setting relations in new EU member countries. Panel estimates indicate a strong and significant relationship between real wages and labor productivity, as well as evidence of wage pass-through to inflation. Terms of trade shocks do not feed through to real wages. Country-specific wage developments, beyond differences in labor productivity growth, are mostly explained by real wage catch-up from different initial levels and different labor market conditions. Qualitative evidence also suggests that public sector wage demonstration effects and institutional factors may play a role in wage determination.

Series:

Working Paper No. 2008/243

Subject:

Labor costs Labor markets Labor productivity Real wages Wages

English

Publication Date:

October 1, 2008

ISBN/ISSN:

9781451871012/1018-5941

Stock No:

WPIEA2008243

Pages:

24

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