Wage growth in the euro area: where do we stand?

Guido Bulligan (), Elisa Guglielminetti and Eliana Viviano
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Guido Bulligan: Bank of Italy

No 413, Questioni di Economia e Finanza (Occasional Papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: One of the key questions about the current economic recovery in the euro area is why the decline in unemployment recorded since the second half of 2013 has been accompanied by subdued growth in nominal wages. In this paper we adopt a Phillips curve framework to assess whether alternative indicators of labour market slack can explain the current modest wage dynamics in the euro area and in its five largest economies. Our results suggest that the intensive margin of labour utilization plays a relevant role in wage growth: our estimates indicate that the shape of the Phillips curve becomes flatter for lower levels of hours per worker, implying that wage growth is less responsive to unemployment. Looking ahead, a significant recovery in the intensive margin appears key to achieve a robust increase in nominal wage growth.

Keywords: wage growth; Phillips curve; intensive margin (search for similar items in EconPapers)
JEL-codes: E24 E31 J21 (search for similar items in EconPapers)
Date: 2017-12
New Economics Papers: this item is included in nep-eec and nep-mac
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:bdi:opques:qef_413_17

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