Working Paper: CEPR ID: DP694
Authors: Jean-Pierre Danthine; Jennifer Hunt
Abstract: It is widely believed that the integration of European economies will have little impact on labour mobility. This does not mean, however, that European labour markets will be unaffected by the process of economic integration. In this paper we show that with increased competition from closer economic integration, the hump-shaped pattern summarizing the relationship between economic performance and the degree of centralization in wage bargaining (Calmfors and Driffill, 1988) flattens out. As a consequence, the importance of the position of a particular economy on the wage-bargaining scale diminishes. We find, however, that the post-integration wage-price structure is closer to the configuration familiar to decentralized economies. It can be inferred that the adjustment to the new environment could be more difficult for economies characterized by centralized wage bargaining.
Keywords: wage bargaining; employment; economic integration; corporatism
JEL Codes: E24; F15; J51; J61; L16
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increased competition due to economic integration (F15) | flattening of the hump-shaped relationship between economic performance and the degree of centralization in wage bargaining (F62) |
| economic integration (F15) | alignment of the wage-price structure with decentralized economies (F16) |
| centralized wage bargaining (J52) | greater adjustment difficulties in response to increased competition (D29) |
| greater adjustment difficulties due to centralized wage bargaining (J59) | negative impact on employment levels during the transition (F66) |
| degree of economic integration (F15) | benefits for middle-ground economies (O53) |