Macroeconomic imbalances in Europe: How to overcome the fallacy of unit labour costs
| Autor: | Piero Esposito, Stefan Collignon |
|---|---|
| Jazyk: | angličtina |
| Rok vydání: | 2020 |
| Předmět: |
Fallacy
Macroeconomics Economics and Econometrics 050208 finance media_common.quotation_subject 05 social sciences Wage Convergence (economics) Return on capital Unit (housing) Competitiveness Unit labour costs Europe Imbalances Competitive index Capital (economics) 0502 economics and business Economics 050207 economics Panel data media_common |
| Popis: | Policy recommendations based on unit labour costs (ULC) indices can lead to undesirable and counterproductive policies, because they do not reveal possible distortions in the base year. In this paper, we discuss the problems with the ULC-current account relation and provide an alternative measure for relative wage costs called Wage Competitive index (WCI) based on the assumption of convergence of the returns on capital. We show how to calculate it and that it is more efficient than traditional ULC and REER indicators. The implication is that policymakers should not focus on nominal wage setting only, but also more broadly on all factors which affect the return on capital. This implies that the well-known Rehn–Meidner rule, which underlies the Macroeconomic Dialogue should be modified. |
| Databáze: | OpenAIRE |
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