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Rethinking wage policy in the face of the Euro crisis: Implications of the wage-led demand regime

Research output: Working paper

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Rethinking wage policy in the face of the Euro crisis: Implications of the wage-led demand regime. / Onaran, Ozlem; Stockhammer, Engelbert.

Kingston upon Thames, U.K. : Faculty of Arts and Social Sciences, Kingston University, 2011. (Economics Discussion Paper).

Research output: Working paper

Harvard

Onaran, O & Stockhammer, E 2011 'Rethinking wage policy in the face of the Euro crisis: Implications of the wage-led demand regime' Economics Discussion Paper, Faculty of Arts and Social Sciences, Kingston University, Kingston upon Thames, U.K. <http://eprints.kingston.ac.uk/22984/>

APA

Onaran, O., & Stockhammer, E. (2011). Rethinking wage policy in the face of the Euro crisis: Implications of the wage-led demand regime. (Economics Discussion Paper). Faculty of Arts and Social Sciences, Kingston University. http://eprints.kingston.ac.uk/22984/

Vancouver

Onaran O, Stockhammer E. Rethinking wage policy in the face of the Euro crisis: Implications of the wage-led demand regime. Kingston upon Thames, U.K.: Faculty of Arts and Social Sciences, Kingston University. 2011. (Economics Discussion Paper).

Author

Onaran, Ozlem ; Stockhammer, Engelbert. / Rethinking wage policy in the face of the Euro crisis: Implications of the wage-led demand regime. Kingston upon Thames, U.K. : Faculty of Arts and Social Sciences, Kingston University, 2011. (Economics Discussion Paper).

Bibtex Download

@techreport{480b008634504fdd8091d264bdaacd8e,
title = "Rethinking wage policy in the face of the Euro crisis: Implications of the wage-led demand regime",
abstract = "Ten years after its introduction, the Euro is in an existential crisis. The crisis is the outcome of economic policies that have aimed at labour market flexibility and financial integration. The paper argues, firstly, that the aggregate demand regime in the Euro area is wage led. While an increase in wages (other things equal) does have a negative effect on investment and on net exports, it does have a positive effect on consumption. As the Euro area is a relatively closed economy the consumption effect overpowers the investment effect and the export effect. Secondly, we argue that in the Euro area two growth models have emerged: a credit-led and an export-led model. These have given rise to the imbalances that are at the heart of the Euro crisis. Wage flexibility has proven insufficient to prevent these imbalances. Thirdly, we advocate a system of coordinated wage bargaining that aims at wages rising in line with productivity growth and a substantially upward-revised inflation target. If the project of European economic integration is to survive, it needs a drastic change in direction. An important building block of this redirection is a rethinking of the role of wage policy.",
keywords = "Euro crisis, European integration, wage policy, Keynesian economics",
author = "Ozlem Onaran and Engelbert Stockhammer",
year = "2011",
language = "Undefined/Unknown",
series = "Economics Discussion Paper",
publisher = "Faculty of Arts and Social Sciences, Kingston University",
type = "WorkingPaper",
institution = "Faculty of Arts and Social Sciences, Kingston University",

}

RIS (suitable for import to EndNote) Download

TY - UNPB

T1 - Rethinking wage policy in the face of the Euro crisis: Implications of the wage-led demand regime

AU - Onaran, Ozlem

AU - Stockhammer, Engelbert

PY - 2011

Y1 - 2011

N2 - Ten years after its introduction, the Euro is in an existential crisis. The crisis is the outcome of economic policies that have aimed at labour market flexibility and financial integration. The paper argues, firstly, that the aggregate demand regime in the Euro area is wage led. While an increase in wages (other things equal) does have a negative effect on investment and on net exports, it does have a positive effect on consumption. As the Euro area is a relatively closed economy the consumption effect overpowers the investment effect and the export effect. Secondly, we argue that in the Euro area two growth models have emerged: a credit-led and an export-led model. These have given rise to the imbalances that are at the heart of the Euro crisis. Wage flexibility has proven insufficient to prevent these imbalances. Thirdly, we advocate a system of coordinated wage bargaining that aims at wages rising in line with productivity growth and a substantially upward-revised inflation target. If the project of European economic integration is to survive, it needs a drastic change in direction. An important building block of this redirection is a rethinking of the role of wage policy.

AB - Ten years after its introduction, the Euro is in an existential crisis. The crisis is the outcome of economic policies that have aimed at labour market flexibility and financial integration. The paper argues, firstly, that the aggregate demand regime in the Euro area is wage led. While an increase in wages (other things equal) does have a negative effect on investment and on net exports, it does have a positive effect on consumption. As the Euro area is a relatively closed economy the consumption effect overpowers the investment effect and the export effect. Secondly, we argue that in the Euro area two growth models have emerged: a credit-led and an export-led model. These have given rise to the imbalances that are at the heart of the Euro crisis. Wage flexibility has proven insufficient to prevent these imbalances. Thirdly, we advocate a system of coordinated wage bargaining that aims at wages rising in line with productivity growth and a substantially upward-revised inflation target. If the project of European economic integration is to survive, it needs a drastic change in direction. An important building block of this redirection is a rethinking of the role of wage policy.

KW - Euro crisis

KW - European integration

KW - wage policy

KW - Keynesian economics

M3 - Working paper

T3 - Economics Discussion Paper

BT - Rethinking wage policy in the face of the Euro crisis: Implications of the wage-led demand regime

PB - Faculty of Arts and Social Sciences, Kingston University

CY - Kingston upon Thames, U.K.

ER -

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