Public Wages in the Euro Area: Towards Securing Stability and Competitiveness

46 Pages Posted: 24 Jun 2010

See all articles by Federic Holm-Hadulla

Federic Holm-Hadulla

European Central Bank (ECB)

Kishore Kamath

Bank of England

Ana Lamo

European Central Bank (ECB)

Javier J. Pérez

Banco de España - Research Department

Ludger Schuknecht

European Central Bank (ECB)

Date Written: June 22, 2010

Abstract

This paper examines the role of government wages in ensuring macroeconomic stability and competitiveness in the euro area. Recent empirical evidence suggests that government wage expenditure is subject to a pro-cyclical bias in most euro area countries and at the euro area aggregate level. Moreover, the evidence points to a strong positive correlation and co-movement between public and private wages in the short to medium term, both directly and indirectly via the price level, in most euro area countries. In a number of countries this interrelation between public and private wages coincided with strong public wage growth and competitiveness losses. These findings underpin the need for prudent public wage policies supported by strong domestic fiscal frameworks and appropriate wage-setting institutions in order to enhance economic stability and competitiveness in Economic and Monetary Union.

Keywords: government wage expenditure, fiscal cyclicality, competitiveness

JEL Classification: E62, E63, J45, H11, H50

Suggested Citation

Holm-Hadulla, Federic and Kamath, Kishore and Lamo, Ana and Perez, Javier J. and Schuknecht, Ludger, Public Wages in the Euro Area: Towards Securing Stability and Competitiveness (June 22, 2010). ECB Occasional Paper No. 112, Available at SSRN: https://ssrn.com/abstract=1618226

Federic Holm-Hadulla (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Kishore Kamath

Bank of England ( email )

Threadneedle Street
London EC2R 8AH
United Kingdom

Ana Lamo

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Javier J. Perez

Banco de España - Research Department ( email )

Alcala 50
28014 Madrid
Spain

HOME PAGE: http://www.bde.es/investigador/staff/95.htm

Ludger Schuknecht

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany
+49 69 1344 6494 (Phone)
+49 69 1344 7809 (Fax)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
82
Abstract Views
850
rank
353,814
PlumX Metrics