Long-Run Equilibrium Adjustment of Wages in Spain

Jose Aixala; Carmen Pelet

doi:10.4067/S0718-88702013000100001

Authors

Jose Aixala Universidad de Zaragoza
Carmen Pelet Universidad de Zaragoza

DOI:

https://doi.org/10.4067/S0718-88702013000100001

Keywords:

Wages, unemployment, productivity, institutional framework, time series

Abstract

This paper provides empirical evidence about the relationship between wages and their determinants in the Spanish economy from a macroeconomic perspective, as well as about the adjustment speed back to long run equilibrium, estimating an error correction mechanism by non-linear methods. The results reveal that the unemployment rate and the bargaining variables have no effect on the evolution of wages. The variable that explains the evolution of wages in the long term is prices, with wages showing slightly inflationary behavior. In the short term, wages are explained by their past values, reflecting a nominal inertia

Downloads

Download data is not yet available.

References

Abraham, F., De Bruyne, K., & Van der Auwera, I. (2000). Will wage policy succeed in Euroland? The case of Belgium. Cahiers Économiques de Bruxelles, 168, 443–480.

Akerlof, G., Dickens, W., & Perry, G. (1996). The macroeconomics of low inflation. Brookings Papers on Economic Activity, 1(1), 1–76. https://doi.org/10.2307/2534646

Akerlof, G., Dickens, W., & Perry, G. (2000). Near-rational wage and price setting and the long-run Phillips curve. Brookings Papers on Economic Activity, 1(1), 1–60. https://doi.org/10.1353/eca.2000.0001

Alujas, J. A. (2003). Políticas activas de mercado de trabajo [Active labour market policies]. Consejo Económico y Social.

Anderton, R. (1993). Spain: Evaluating the effects of macro policy using an econometric model. National Institute Economic Review, 146(1), 76–89. https://doi.org/10.1177/002795019314600106

Anderton, R. (1998). Policy regimes and the persistence of wage inflation and unemployment. The Manchester School, 66(4), 418–438. https://doi.org/10.1111/1467-9957.00115

Andrés, J., & García, J. (1990). La persistencia del desempleo en España: Un enfoque agregado [The persistence of unemployment in Spain: An aggregate approach]. En J. Velarde, J. L. García Delgado, & A. Pedreño (Eds.), La industria española: Recuperación, estructura y mercado de trabajo (pp. 347–386). Colegio de Economistas.

Ascari, G. (2003). Price-wage staggering and persistence: A unifying framework. Journal of Economic Surveys, 17(4), 511–540. https://doi.org/10.1111/1467-6419.00203

Bentolila, S., & Dolado, J. J. (1994). Labour flexibility and wages: Lessons from Spain. Economic Policy, 18(18), 55–99. https://doi.org/10.2307/1344458

Bentolila, S., Izquierdo, M., & Jimeno, J. F. (2010). Negociación colectiva: La gran reforma pendiente [Collective bargaining: The great pending reform]. Papeles de Economía Española, 124, 176–192.

Bentolila, S., & Jimeno, J. F. (2002). La reforma de la negociación colectiva en España [The reform of collective bargaining in Spain] (Documento de Trabajo N.º 02-03). Fundación de Estudios de Economía Aplicada.

Brandsma, A. S., & Van der Windt, N. (1983). Wage bargaining and the Phillips curve: A macroeconomic view. Applied Economics, 15(1), 61–71. https://doi.org/10.1080/00036848300000052

Broersma, L., & Den Butter, F. (2002). An explorative empirical analysis of the influence of labour flows on wage formation. Applied Economics, 34(13), 1583–1592. https://doi.org/10.1080/00036840110116405

Bruno, M., & Sachs, J. (1985). Economics of worldwide stagflation. Basil Blackwell.

Calmfors, L., & Driffill, J. (1988). Bargaining structure, corporatism and macroeconomic performance. Economic Policy, 6(6), 13–61. https://doi.org/10.2307/1344503

Castle, J. L., & Hendry, D. F. (2009). The long-run determinants of UK wages, 1860–2004. Journal of Macroeconomics, 31(1), 5–28. https://doi.org/10.1016/j.jmacro.2007.08.018

Coe, D. T. (1988). Hysteresis effects in aggregate wage equations. In R. Cross (Ed.), Unemployment hysteresis and the natural rate hypothesis (pp. 284–305). Basil Blackwell.

Conde-Ruiz, J. I., Felgueroso, F., & García Pérez, J. I. (2010). Las reformas laborales en España: Un modelo agotado [Labour market reforms in Spain: An exhausted model]. Papeles de Economía Española, 124, 128–147.

Consejo Económico y Social. (2009). Memoria sobre la situación socioeconómica y laboral de España [Report on the socio-economic and labour situation of Spain]. Consejo Económico y Social de España.

Dolado, J. J., Felgueroso, F., & Jansen, M. (2010). El conflicto entre la demanda de flexibilidad laboral y la resistencia a la reforma del mercado de trabajo [The conflict between the demand for labour flexibility and the resistance to labour market reform]. Papeles de Economía Española, 124, 84–96.

Dolado, J. J., Malo de Molina, J. L., & Zabalza, A. (1986). Spanish industrial unemployment: Some explanatory facts. Economica, 53, 313–335.

Elliott, G., Rothenberg, T. J., & Stock, J. H. (1996). Efficient tests for an autoregressive unit root. Econometrica, 64(4), 813–836. https://doi.org/10.2307/2171846

Engle, R. F., & Granger, C. W. J. (1987). Co-integration and error correction: Representation, estimation and testing. Econometrica, 55(2), 251–276. https://doi.org/10.2307/1913236

Estrada, A., Hernando, I., & López-Salido, J. D. (2002). La medición de la NAIRU en la economía española [Measuring the NAIRU in the Spanish economy]. Moneda y Crédito, 215, 69–107.

Fina, L. L., González de Lena, F., & Pérez Infante, J. L. (2001). Negociación colectiva y salarios en España [Collective bargaining and wages in Spain]. Consejo Económico y Social.

Friedman, M. (1968). The role of monetary policy. American Economic Review, 58(1), 1–18.

Friedman, M. (1977). Inflation and unemployment. Journal of Political Economy, 85(3), 451–473. https://doi.org/10.1086/260579

Friedman, M. (1991). Monetarist economics. Basil Blackwell.

Gómez, F., & Usabiaga, C. (2001). Las estimaciones del desempleo de equilibrio: Una panorámica [Estimates of equilibrium unemployment: An overview]. Revista de Economía Aplicada, 9(27), 103–129.

Granger, C. W. J. (1981). Some properties of time series data and their use in econometric model specification. Journal of Econometrics, 16(1), 121–130. https://doi.org/10.1016/0304-4076(81)90079-8

Jimeno, J. F., & Toharia, L. (1992). El mercado de trabajo español en el proceso de convergencia hacia la Unión Económica y Monetaria Europea [The Spanish labour market in the process of convergence towards European Economic and Monetary Union]. Papeles de Economía Española, 52/53, 78–107.

Karanassou, M., Sala, H., & Snower, D. J. (2005). A reappraisal of the inflation-unemployment trade-off. European Journal of Political Economy, 21(1), 1–32.

Karanassou, M., Sala, H., & Snower, D. J. (2008a). Long-run inflation-unemployment dynamics: The Spanish Phillips curve and economic policy. Journal of Policy Modeling, 30(2), 279–300. https://doi.org/10.1016/j.jpolmod.2007.04.002

Karanassou, M., Sala, H., & Snower, D. J. (2008b). The evolution of inflation and unemployment: Explaining the roaring nineties. Australian Economic Papers, 47(4), 334–354. https://doi.org/10.1111/j.1467-8454.2008.00353.x

Karanassou, M., Sala, H., & Snower, D. J. (2010). The wage-productivity gap revisited: Is the labour share neutral to employment? (Working Paper No. 668). Queen Mary, University of London.

Layard, R., & Nickell, S. (1985). Unemployment in Britain. Economica, 53(210, Supplement), S121–S169. https://doi.org/10.2307/2554377

Layard, R., Nickell, S., & Jackman, R. (1991). Unemployment: Macroeconomic performance and the labour market. Oxford University Press.

Lipsey, R. G., & Parkin, J. M. (1970). Incomes policy: A reappraisal. Economica, 37, 115–138.

López, E. (1991). El crecimiento de precios y salarios en la economía española: 1964–1988 [The growth of prices and wages in the Spanish economy: 1964–1988]. En C. Molinas, M. Sebastián, & A. Zabalza (Eds.), La economía española: Una perspectiva macroeconómica (pp. 351–397). Instituto de Estudios Fiscales.

Maddala, G. S., & Kim, I. M. (1999). Unit roots, cointegration, and structural change. Cambridge University Press. https://doi.org/10.1017/cbo9780511751974

Malo de Molina, J. L. (1993). Mercado de trabajo: Empleo y salarios. Distorsiones y ajustes [Labour market: Employment and wages. Distortions and adjustments]. En J. L. García Delgado (Ed.), España: Economía (pp. 1149–1178). Espasa-Calpe.

Napolitano, O. (2000). Il fenomeno della disoccupazione in Italia negli ultimi dieci anni: Alcune risposte da un modello corretto con aspettative razionali [Unemployment in Italy over the last ten years: Some answers from a model corrected with rational expectations]. Studi Economici, 55, 55–71.

Ng, S., & Perron, P. (1995). Unit root tests in ARMA models with data-dependent methods for the selection of the truncation lag. Journal of the American Statistical Association, 90(429), 268–281. https://doi.org/10.1080/01621459.1995.10476510

Nymoen, R. (1989). Modelling wages in the small open economy: An error-correction model of Norwegian manufacturing wages. Oxford Bulletin of Economics and Statistics, 51(3), 239–258. https://doi.org/10.1111/j.1468-0084.1989.mp51003002.x

Nymoen, R., & Rødseth, A. (2003). Explaining unemployment: Some lessons from Nordic wage formation. Labour Economics, 10(1), 1–29. https://doi.org/10.1016/s0927-5371(02)00133-1

Palacio, J. I., & Álvarez, C. (2004). El mercado de trabajo: Análisis y políticas [The labour market: Analysis and policies]. Akal.

Pérez Infante, J. I. (2009). La concertación y el diálogo social en España: 1977–2007 [Social concertation and social dialogue in Spain: 1977–2007]. Revista del Ministerio de Trabajo e Inmigración, 81, 41–69.

Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of Applied Econometrics, 16(3), 289–326. https://doi.org/10.1002/jae.616

Phelps, E. S. (1967). Phillips curves, expectations of inflation, and optimal unemployment over time. Economica, 34(135), 254–281. https://doi.org/10.2307/2552025

Phillips, A. W. (1958). The relation between unemployment and the rate of change of money wage rates in the United Kingdom, 1861–1957. Economica, 25(100), 283–299. https://doi.org/10.2307/2550759

Phillips, P. C. B., & Perron, P. (1988). Testing for a unit root in time series regression. Biometrika, 75(2), 335–346. https://doi.org/10.1093/biomet/75.2.335

Ramos, R., Suriñach, J., & Artís, M. (2010). ¿Es necesario reformar las políticas activas del mercado de trabajo en España? Algunos elementos para la reflexión [Is it necessary to reform active labour market policies in Spain? Some elements for reflection]. Papeles de Economía Española, 124, 281–300.

Rodríguez, G. (2004). Formación de salarios en la economía española [Wage formation in the Spanish economy]. Revista del Ministerio de Trabajo y Asuntos Sociales, 51, 55–83.

Sargan, D. J. (1980). A model of wage-price inflation. Review of Economic Studies, 47(1), 97–112. https://doi.org/10.2307/2297105

Segura, J. (2001). La reforma del mercado de trabajo: Un panorama [Labour market reform: An overview]. Revista de Economía Aplicada, 9(25), 157–190.

Segura, J. (2004). Una guía de las reformas del mercado de trabajo español en la democracia [A guide to the Spanish labour market reforms under democracy]. Papeles de Economía Española, 100(2), 102–111.

Toharia, L. (2003). El mercado de trabajo en España, 1978–2003 [The labour market in Spain, 1978–2003]. Información Comercial Española, 811, 203–220.

Viñals, J., & Jimeno, J. F. (1997). El mercado de trabajo español y la Unión Económica y Monetaria Europea [The Spanish labour market and European Economic and Monetary Union]. Papeles de Economía Española, 72, 21–36.

Wölfl, A., & Mora-Sanguinetti, J. S. (2011). Reforming the labour market in Spain (OECD Economics Department Working Paper No. 845). OECD.