نهادهای بازار کار و نوسانات نرخ تورم در منطقه اروپا

Despite having had the same currency for many years, EMU countries still have quite different inflation dynamics. In this paper we explore one possible reason: country specific labor market institutions, giving rise to different inflation volatilities. When unemployment insurance schemes differ, as they do in EMU, reservation wages react differently in each country to area-wide shocks. This implies that real marginal costs and inflation also react differently. We report evidence for EMU countries supporting the existence of a cross-country link over the cycle between labor market structures on the one side and real wages and inflation on the other. We then build a DSGE model that replicates the data evidence. The inflation volatility differentials produced by asymmetric labor markets generate welfare losses at the currency area level of approximately 0.3% of steady state consumption.

Inflation differentials are still pronounced among euro area countries despite the existence, for many years, of a common currency, a single market for products, capital and labor (though with low labor mobility) and tightly harmonized fiscal policies. Why is it so? Research to date has concentrated on differentials in inflation levels, explaining their size and persistence on the basis of convergence mechanisms such as the “Balassa Samuelson”, or asymmetric national shocks (in aggregate demand, or supply, or in the degree of exposure to area-wide external shocks), whose effect are typically exacerbated by high inflation persistence.1 Here we look instead at inflation volatility differentials and study their link with labor market institutions–specifically, the degree of coverage of unemployment insurance.

In this paper we study the role of labor market differences in generating differential inflation volatility among euro area countries. To do this we use a stylized DSGE model where labor market frictions are an important determinant of the dynamics of marginal costs of firms, which in turn are a main driver of inflation. We find that differences in labor market institutions (proxied by the replacement rates, or alternatively by a measure of workers’ bargaining power) can generate significant volatility differentials in real wages, marginal costs for firms and inflation when the model is subject to a variety of realistic shocks. Those volatility differentials generate important welfare losses. The volatilities of the three aforementioned variables tend to be higher when the unemployed is less protected (low replacement rate) or the employed is more protected (high bargaining power). The link between labor market institutions and volatilities embodied in our model approximates well the one observed in the data.