The National–Transnational Wage‐Setting Nexus in Europe: What have We Learned from the Early Years of Monetary Integration?

Abstract

Abstract Wage growth has become increasingly interdependent in the European monetary and economic union but a stubborn differential in wage growth rates of some European countries persists. Can peculiarities of national wage‐bargaining systems explain this situation? The article develops the idea that wage growth differentials across Europe are due to differences in wage‐bargaining systems. It is demonstrated that wage growth in the exposed industry is restrained by competition. Spillovers from the exposed sector of the economy to the public sector thus can induce overall wage restraint. However, it is shown that spillovers from the exposed to the public sector differ according to the wage‐bargaining system. Pattern‐setting regimes lead to substantial spillovers and thus induce higher wage restraint than other wage‐bargaining systems.

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