Wage-Price Setting in New EU Member States
IMF Working Papers, October 1, 2008
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- Wage-Price Setting in New EU Member States
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Bibliographic details
- Authors: Manuela Goretti
- Published: October 1, 2008
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451871012.001
Major findings
- Panel estimates indicate a strong and significant relationship between real wages and labor productivity.
- Evidence of wage pass-through to inflation is found.
- 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 suggests that public sector wage demonstration effects and institutional factors may play a role in wage determination.
Econometric and empirical evidence
- Panel estimation results: strong and significant relationship between real wages and labor productivity.
- Wage pass-through: measurable effect from wages to inflation identified.
- Terms-of-trade channel: no feed-through from terms of trade shocks to real wages detected.
Country-specific drivers
- Real wage catch-up from different initial levels is a primary source of cross-country wage divergence.
- Different labor market conditions account for much of country-specific wage developments beyond productivity differences.
- Institutional factors and public sector wage demonstration effects appear influential based on qualitative evidence.
Research scope and metadata highlights
- Working Paper No. 2008/243
- Pages: 24
- DOI: https://doi.org/10.5089/9781451871012.001
Source: IMF Working Paper No. 2008/243.