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Monetary regimes and the endogeneity of labour market structures: empirical evidence from Denmark, 1875–2007

Published online by Cambridge University Press:  01 August 2009

KIM ABILDGREN
KIM ABILDGREN*
Affiliation:
Havnegade 5, Economics Department, Danmarks Nationalbank, Copenhagen, DK-1093, Denmark, [email protected]
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Abstract

This article traces links between the monetary regime and some institutions of the labour market in Denmark over the past century. The results indicate that elements of the labour market are endogenous. The longest wage contract terms are found towards the end of the pre-World War I classical gold standard period – characterised by price-level stability – and during the period since the mid 1990s that has seen a firm fixed exchange-rate policy and low and stable inflation. The shortest contract lengths are observed in the interwar period with high inflation volatility. Inflation indexation of wages was used most extensively in the Bretton Woods period and during the soft peg period of the 1970s when inflation was high and rising. The degree of nominal wage rigidity in the economy is therefore not necessarily approximately constant, as it is otherwise assumed in many New Keynesian models.

Type
Research Article
Information
European Review of Economic History , Volume 13 , Issue 2 , August 2009 , pp. 199 - 218
Copyright
Copyright © European Historical Economics Society 2009

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