Pattern Bargaining in Germany: Does It Exist? and Why It Matters for EMU

Thursday, July 13, 2017
JWS - Room J10 (J355) (University of Glasgow)
Donato Di Carlo , Max-Planck-Institute for the Study of Societies
In the EMU wage setting matters for domestic macroeconomic adjustment. In studying the lack of convergence during the first decade of EMU, extant comparative political economy (CPE) literature has highlighted the marked trajectory of wage restraint in the German public sector. This has been explained via pattern bargaining. Such feature is considered an institutional comparative advantage in the production and reproduction of wage restraint, which, in turn, is thought to elicit structural export competitiveness and current account surpluses.
The objective of this paper is twofold. First, I have a literature-assessing ambition in order to take stock of the central insights thereof and derive predictions regarding both the logic of the institution and the likely effects one should observe in the economy in order to verify its presence and functioning. Second, I have a theory-testing ambition. I perform hoop tests to verify the necessity of pattern bargaining as a condition for wage restraint in the German public sector.
I argue that pattern bargaining in Germany starts to unravel approximately around 1995; as a consequence, this feature does not explain wage restraint in the German public sector during EMU.
The findings of the paper contribute to a well-established niche in CPE and industrial relations. I suppose scholars in these fields will be interested to learn that we have relied, for too long, on stylized facts concerning the functioning of German industrial relations
  • Pattern Bargaining in Germany, does it exist, And why it matters for EMU (MPIfG discussion paper version).pdf (801.0 kB)