Autori: Caiani, A., Catullo, E. Gallegati, M.
Editore: Elsevier
Tipologia Prodotto: Articolo in Rivista
DOI: https://doi.org/10.1016/j.jebo.2018.12.023
Titolo della Rivista: Journal of Economic Behavior and Organization
Numero; Volume: 162
Numero prima e ultima pagina: 389 – 416
Codice ISSN: 0167-2681
Anno di Pubblicazione: 2019
Link: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2904953
Abstract:
The Eurozone crisis has revitalized the debate between economists on the role played by wages in open economies. Salaries paid to workers are at the same time a fundamental source of aggregate demand and a determinant of firms’ international cost competitive-ness. The paper investigates how alternative wage growth patterns impact on the economic dynamics of an artificial Monetary Union. For this sake, we perform several experiments
employing the Agent Based-Stock Flow Consistent (AB-SFC) Multi-Country model first pre-sented in Caiani et al. (2018a). Results show that a change in the wage growth pattern impacts in non-trivial ways on the demand and supply sides of the economies, giving rise to Keynesian and Schum-peterian effects. When occurring in a single country, wage expansions lead to a transitory deterioration of the country current account and to a slow-down of the economy in the short-run. However, on a longer time-span, higher wages tend to improve firms’ innovative performance by strengthening the process of Schumpeterian competition, providing long-run benefits in terms of higher labor productivity which allow the economy to recover. Conversely, a coordinated expansion of wages in all countries, which leaves their relative competitive position unaffected, tends to benefit real GDP, labor productivity growth, and countries’ public finance, while not affecting unemployment and countries’ external bal- ance. A specular dynamics characterizes the experiments investigating the effects of wage moderation.
Extensive sensitivity experiments show that these results are robust to different di-mensions of the Monetary Union and that the efficacy of coordinated wage expansionary strategies is enhanced when consumers give more importance to price differentials in their consumption allocation decisions.
Keywords: Agent-based macroeconomics – Stock flow consistent models – European integration – Wages – Trade imbalances – Schumpeterian Competition