What is widely believed in academic research is that adjusting wage negotiations is essential for the financial success in the euro sphere. Vytautaskuokštis and Simonas Algirdas Spurga indicate that this debate is no longer held in consideration of the economic performance of new member countries.
In influence, influential academic research claims that the euro -sphere structure supports the export -led economic economy in the northwest Europe rather than the economy in Southern Europe, which mainly depends on domestic demand. As ALISON Johnston and Aidan Regan explained, the winners of European integration are the most similar “national nation” to the ideal type built mainly based on the image of the German economy.
An important factor in this is the role of wage negotiations by an organization -like organization (often called a “corporateist organization”). If these institutions cooperate with powerful and effectively, there is a tendency to adjust the wage of the whole economy as a whole. Countries with strong wages are considered to be better due to export -led growth, and thus financial success in the Euro area.
However, this perspective has several remarkable blind spots. First, the debate focuses mainly on the effects of coordinating wages on external competitiveness, ignoring the actual GDP growth, the most important indicator of long -term economic success.
Second, the academic literature covers the interaction between Northern Europe and Southern Europe, which overlooks the experience of a new member country. A new paper shows that the conventional wisdom revisit and that a new member of the Euro area is considered, the assumed relationship between the Corporateist and economic growth is no longer retained.
Adjustment of wage negotiations and international competitiveness
Adjustment of wage negotiations refers to the range where the process of negotiating wages and other employment conditions is organizing or harmonizing at various levels in the economy, sector, or region. A wide range of wage settlements can help achieve various national economic goals. It has been shown to affect unemployment and inflation, wage inequality, and global imbalance. However, discussions on the euro area usually emphasize the important roles of wage negotiations in ensuring international competitiveness.
Many scholars explain how the Euro economy in Northern Europe has adopted the Corporate wage setting agency to promote export -oriented growth systems at the global financial crisis. Adjusted wage negotiations promoted wage suppression of the entire economy, restricted labor costs, and secured price competitiveness. As a result, the Corporateist “North” has created a permanent trade surplus reflected in the deficit of “South”. This uneven distribution ability, which provides wage suppression, to hinder the nominal of the exchange rate, has a foundation for the Sobulin Debt Crisis that does not damage the export competitiveness of member countries that are not well adjusted. I did it.
After the crisis, a new macro economic governance framework was introduced in the Euro area, and stability and growth agreements became core. This is considered to further support (or impose) export -led growth strategies, while restricting domestic demand -led models, and the entire euro area has increased substantial trade surplus. In this environment, countries with strong wage control are considered to be suitable for organizing, providing wage suppression, and complying with the Euro Rule Book.
Hump -type explanation
What happens if you consider the countries that have recently participated in the Euro area, that is, Slovenia, Cyprus, Malta, Slovakia, Estonia, Latvia, and Lithuania? Looking at only the former members of the original euro area (plus Greece), it suggests that larger adjustments correlate with long -term growth. However, as shown in Fig. 1, including these new member countries, the relationship between wage adjustment and growth seems to be in the shape of a bump, not linear.
Figure 1: Coordination of wage and real GDP within the euro area
Note: This figure shows the relationship between the average level of national wage adjustment and the average GDP growth per person. For more information, see the author’s associated working paper.
In our paper, a wide range of measurement economic tests are conducted, and the adjustment of the intermediate level is related to the GDP of the real GDP per person within the euro area, which has been reduced by about 1.3-1.8 %. We provide further evidence. This provides a powerful evidence that the wage adjustment and economic success should be reconsidered.
Explain the bumps
The above results match the classic works of Lars Calmfors and John Driffill. At the intermediate level of wage adjustment, there is sufficient group negotiations to create strict wages, but it is not enough to inherent the wider economic results of wage reconciliation. In contrast, very low adjustment tends to consistently consistently consistent with corporate -level productivity, thanks to market discipline, but very high adjustments can reduce wages on the whole economy as a whole. In both cases, wage dynamics match the maintenance of external competitiveness.
Our research indicates that countries such as Lithuania, Latvia, Estonia, and Malta have the highest average growth rate. Slovenia and Cyprus, on the other hand, have grown more slowly after adjusting moderate levels. This discovery depends on all of the universal explanations for the success of the euro area, overlooking the reality of the low -tone Japanese country, which is performing or more as well as the highly adjusted counter part. Suggests that.
These insights indicate that the euro area can handle multiple types of capitalist models, indicating that strong wage adjustment is not the only way to success. For example, our survey suggests that when Poland (currently a low -adjusted country) adopts the euro, the prospect of growth is not always dangerous. The more subtle appearance of the wage negotiations indicates that both high adjustment systems and low adjustment systems prosper, but those sandwiched between the center may be in a clear disadvantageous position.
This work was supported by the Lithuanian Research Council under the grant number P-MIP-22-312.
Note: This article shows the author’s views, not European politics and policies, or European positions in London School of Economics. Special images Credit: European Union
