We are grateful to Iman van Lelyveld for sending us his data on central bank independence, as well as to Andrew Glyn and two anonymous referees for very helpful comments. The first version of this paper was written whilst Bowdler was a British Academy Post-doctoral Fellow at Nuffield College, Oxford. Financial support from the British Academy is gratefully acknowledged.
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Inflation Adjustment and Labour Market Structures: Evidence from a Multi-country Study†
Article first published online: 8 OCT 2007
DOI: 10.1111/j.1467-9442.2007.00504.x
Additional Information
How to Cite
Bowdler, C. and Nunziata, L. (2007), Inflation Adjustment and Labour Market Structures: Evidence from a Multi-country Study. The Scandinavian Journal of Economics, 109: 619–642. doi: 10.1111/j.1467-9442.2007.00504.x
- †
Publication History
- Issue published online: 8 OCT 2007
- Article first published online: 8 OCT 2007
- First version submitted January 2005;final version received September 2006.
- Abstract
- Article
- References
- Cited By
Keywords:
- Inflation;
- input price shocks;
- labour market coordination;
- trade union density
- E31;
- J51
Abstract
The impact of labour market structures on the response of inflation to macroeconomic shocks is analysed empirically. 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.