IMF国际货币组织全球-European-Wage-Dynamics-and-Spillovers_29页_1mb

European Wage Dynamics and Spillovers Summary

Core Content

This IMF Working Paper by Yuanyan Sophia Zhang investigates the wage dynamics and spillovers between the EU15 (advanced Europe) and newer EU member states (NMS) in the context of divergent wage growth patterns. The paper uses econometric analysis, particularly error correction models (ECMs), to examine the long-run and short-run determinants of wage growth, highlighting the role of labor market slack, productivity, inflation expectations, and cross-border spillovers.

Main Views

• Wage Growth Divergence: Advanced Europe (EU15) has experienced persistently low nominal wage growth since 2012, while newer EU members have seen a sharp acceleration in wage growth since 2014.
• Real Wage Overhang: In advanced Europe, real wage growth has remained below trend productivity, leading to a real wage overhang. This overhang has contributed to subdued wage growth even as unemployment declines.
• Labor Market Slack: Traditional indicators like unemployment are not sufficient to capture labor market slack. Broader measures, including non-employment and hours worked per person, are more relevant for wage dynamics.
• Inflation Expectations and Phillips Curve: Wage growth in advanced Europe is more closely tied to inflation and inflation expectations in the short run, indicating greater nominal wage inertia.
• Cross-Border Spillovers: Spillovers from neighboring countries, particularly Germany, and from wage moderation in advanced Europe have had a drag on wage growth in newer members.

Key Information

Stylized Facts

• EU15: Average nominal wage growth has remained around 1.5% since 2011, down from over 3% in 2003-09. Real wage growth has remained below trend productivity, with the wage/productivity ratio stabilizing only in 2017-18.
• Newer EU Members (NMS): Nominal wage growth accelerated significantly, reaching over 8% by mid-2018. Real wage growth surged to nearly 6% year over year, well above trend productivity growth.
• Unemployment Trends: Unemployment in the EU15 fell from ~11% in 2013 to ~8% by 2018. In NMS, it dropped by an average of 6 percentage points since 2013, bringing it down to ~5.5%.
• Labor Shortages: NMS experienced stronger labor shortages, especially in industry, compared to EU15, suggesting tighter labor market conditions.

Data and Methodology

• Wage Measure: Total labor compensation per employee hour is used as the key wage measure.
• Error Correction Model (ECM): Used to capture both long-run equilibrium and short-run dynamics.
• Labor Market Slack Indicators: Includes non-employment (NE) index, hours worked per person, and unemployment gaps.
• Cross-Border Spillovers: Considered through GDP-weighted averages of wage and unemployment rates in the euro area, and through German wage influence.

Econometric Specifications

• Long-Run Model:
  $$
  \ln RW_t = \alpha + \beta_1 \ln Ptvy_t^{\text{trend}} + \beta_2 \text{Reform}t + \beta_3 \ln RW{f,t} + ECM_t
  $$
  • Real wages are primarily driven by trend productivity.
  • Labor market reforms and foreign real wages have long-term impacts.
• Short-Run Model:
  $$
  d\ln W_t = \alpha + \beta_0 d\ln W_{t-4} + \beta_1 d\ln Ptvy_{t-L}^{\text{trend}} + \beta_2 d\ln HICP_{t-L} + \beta_3 \exp \inf_{t-L} + \beta_4 NE_{\text{gap},t-L} + \beta_5 d\ln NE_{t-L} + \beta_6 \text{Hour}{\text{gap},t-L} + \beta_7 d\ln W{f,t-L} + \beta_8 dU_{f,t-L} + ECM_{t-4} + \varepsilon_t
  $$
  • Includes lagged wage growth, inflation, inflation expectations, productivity, and unemployment indicators.
  • Accounts for cross-border spillovers from foreign wage growth and unemployment.

Regression Results

Long-Run Relationship

• Germany: Elasticity of real wages to productivity is close to unity. Hartz reforms reduced equilibrium real wages by 5.5%.
• France: Unemployment benefit reforms increased real wages by 3.2%.
• Austria: Employment protection reforms reduced real wages by 3%.
• Belgium: French wages have a lasting effect.
• Spain: Unemployment benefit reforms reduced real wages by 4%.
• Netherlands: German wages influence real wages with a coefficient of ~0.898.

Newer EU Members

• Productivity gains are generally translated into real wage increases, with coefficients close to unity in most NMS.
• Poland and Hungary are outliers due to data issues and structural wage policies (e.g., wage freezes, migrant worker surges).
• No long-run impact from foreign wages is found in NMS, with trend productivity as the key driver.

Factors Driving Wage Growth

• Productivity: The primary long-run driver of real wage growth.
• Labor Market Reforms: Affect real wage levels, particularly in EU15.
• Non-employment Indicators: Provide more accurate measures of labor market slack than unemployment alone.
• Cross-Border Spillovers: German wages and unemployment rates influence wage growth in other EU countries.
• Inflation Expectations: Play a significant role in short-run wage dynamics.

Simulation and Outlook

• Spillover Effects: Subdued wage growth in advanced Europe has had a drag on wage increases in NMS.
• Wage Outlook: The real wage/productivity ratio in NMS has increased significantly, suggesting a potential for future wage growth as labor markets tighten.

Conclusion

The paper highlights the divergent wage dynamics between EU15 and NMS, emphasizing the role of productivity, labor market slack, and cross-border spillovers. It suggests that wage growth in advanced Europe is more inert, while newer members have experienced stronger wage recovery due to tighter labor markets and greater flexibility. The findings support the use of broader labor market indicators and highlight the importance of cross-border wage linkages in shaping wage outcomes.