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

27 Pages Posted: 8 Mar 2005

See all articles by L. Nunziata

L. Nunziata

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

C. Bowdler

University of Oxford

Date Written: March 2005

Abstract

An empirical analysis of the impact of labour market structures on the response of inflation to macroeconomic shocks is presented. Results based on a 20 country panel show that if labour 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 labour supply, measured by the percentage unionisation of the workforce, appears to amplify the response of inflation to its reduced form determinants. These findings are attributed to the behaviour of wages following movements in demand- and supply-side conditions.

Keywords: inflation, input price shocks, labour market coordination, trade union density

JEL Classification: E31, J51

Suggested Citation

Nunziata, Luca and Bowdler, Christopher, Inflation Adjustment and Labour Market Structures: Evidence from a Multi-Country Study (March 2005). IZA Discussion Paper No. 1510. Available at SSRN: https://ssrn.com/abstract=680603

Luca Nunziata (Contact Author)

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

Christopher Bowdler

University of Oxford ( email )

Oxford
United Kingdom

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