Exchange Rates and Wages in Unionised Labour Markets
24 Pages Posted: 7 Jun 2010
Date Written: June 7, 2010
We investigate the impact of exchange rate movements on wage determination in unionised labour markets. Using a simple model of international oligopoly, we show that organised labour has a rational incentive to accept lower wages in the face of a currency appreciation. This proposition is examined empirically using a matched worker-firm dataset for Portugal. We find results consistent with the predictions of the model, though the impact varies considerably with both worker characteristics and the regional unemployment rate.
Keywords: Exchange Rates, Trade Unions, Wage Bargaining, Worker-Firm Data
JEL Classification: F31, J3, J5
Suggested Citation: Suggested Citation