Pattern Bargaining and Wage Leadership in a Small Open Economy

37 Pages Posted: 18 Jul 2011

See all articles by Lars Calmfors

Lars Calmfors

Research Institute of Industrial Economics; IIES

Anna Larsson

Stockholm University

Multiple version iconThere are 2 versions of this paper

Date Written: July 18, 2011

Abstract

Pattern bargaining with the tradables (manufacturing) sector as wage leader is a common form of wage bargaining in Europe. We question the conventional wisdom that such bargaining produces wage restraint. In our model all forms of pattern bargaining give the same outcomes as uncoordinated bargaining under inflation targeting. Under monetary union wage leadership for the non-tradables sector is conducive to wage restraint, whereas wage leadership for the tradables sector is not. Comparison thinking may lead the follower to set the same wage as the leader. Such equilibria can arise when the leader sector is the smaller sector and promote high employment.

Keywords: pattern bargaining, wage setting, inflation targeting, monetary regimes

JEL Classification: E240, J500

Suggested Citation

Calmfors, Lars and Larsson, Anna, Pattern Bargaining and Wage Leadership in a Small Open Economy (July 18, 2011). CESifo Working Paper Series No. 3510, Available at SSRN: https://ssrn.com/abstract=1888165

Lars Calmfors (Contact Author)

Research Institute of Industrial Economics ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden
+46761355814 (Phone)

IIES ( email )

Stockholm, SE-10691
Sweden
+468163076 (Phone)

Anna Larsson

Stockholm University ( email )

Universitetsvägen 10
Stockholm, Stockholm SE-106 91
Sweden

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