European Journal of Political Economy volume 8, issue 4, P527-541 1992 DOI: 10.1016/0176-2680(92)90039-j View full text
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F.A.G. den Butter, R.F. van de Wijngaert

Abstract: The 'wage space', which is defined as the sum of price inflation and labour productivity growth, has played a major role as an indicator of allowable wage increases in the postwar wage negotiations in the Netherlands. This paper shows that: (a) wages and the wage space are cointegrated; (b) the deviation between wages and the wage space may act as an error correction term in the wage equation when both variables are identified as I(2); and (c) political consensus and the threat of labour conflicts (rather than…

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