Inflation Adjustment and Labor Market Structures: Evidence from a Multi-Country Study

24 Pages Posted: 20 Nov 2007

See all articles by C. Bowdler

C. Bowdler

University of Oxford

L. Nunziata

University of Padua - Department of Economics; IZA Institute of Labor Economics

Date Written: 2005-01

Abstract

The impact of labor market structures on the response of inflation to macroeconomic shocks is analyzed empirically. Results based on a 20-country panel show that if labor market coordination is high, the effect on inflation of movements in unemployment, import prices, tax rates and productivity is dampened, both on impact and dynamically. In contrast, monopoly power in labor supply, measured by the percentage unionization of the workforce, appears to amplify the response of inflation to its reduced-form determinants. These findings are attributed to the behavior of wages following movements in demand- and supply-side conditions.

Suggested Citation

Bowdler, Christopher and Nunziata, Luca, Inflation Adjustment and Labor Market Structures: Evidence from a Multi-Country Study (2005-01). Scandinavian Journal of Economics, Vol. 109, Issue 3, pp. 619-642, September 2007. Available at SSRN: https://ssrn.com/abstract=1031537 or http://dx.doi.org/10.1111/j.1467-9442.2007.00504.x

Christopher Bowdler (Contact Author)

University of Oxford ( email )

Oxford
United Kingdom

Luca Nunziata

University of Padua - Department of Economics ( email )

via Del Santo 33
Padova, 35123
Italy

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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