Cookies?
Library Header Image
LSE Research Online LSE Library Services

Comparative institutional advantage in the European sovereign debt crisis

Johnston, Alison, Hancké, Bob and Pant, Suman (2014) Comparative institutional advantage in the European sovereign debt crisis. Comparative Political Studies, online . ISSN 0010-4140

Full text not available from this repository.

Abstract

Excessive fiscal spending is commonly cited as a root of the current European debt crisis. This article suggests, like others, that the rise of competitiveness imbalances contributing to national imbalances in total borrowing is a better explanation for systemic differences toward Economic and Monetary Union (EMU) countries’ exposure to market speculation. We identify one driver of this divergence: a country’s capacity to limit sheltered sector wage growth, relative to wage growth in the manufacturing sector. Corporatist institutions that linked sectoral wage developments together in the surplus countries provided those with a comparative wage advantage vis-à-vis EMU’s debtor nations, which helps explain why the EMU core has emerged relatively unscathed from market speculation during the crisis despite the poor fiscal performance of some of the core countries during EMU’s early years. Using a panel regression analysis, we demonstrate that rising differentials between public and manufacturing sector wage growth, and wage-governance institutions that weakly coordinate exposed and sheltered sectors, are significantly correlated with export decline. We also find that weak-governance institutions are significantly associated with more prominent export decline inside as opposed to outside a monetary union.

Item Type: Article
Official URL: http://cps.sagepub.com/
Additional Information: © 2014 by SAGE Publications
Library of Congress subject classification: H Social Sciences > HC Economic History and Conditions
H Social Sciences > HN Social history and conditions. Social problems. Social reform
Sets: Departments > European Institute
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Funders: Oregon State University’s School of Public Policy seed
Date Deposited: 17 Jul 2014 15:21
URL: http://eprints.lse.ac.uk/57688/

Actions (login required)

Record administration - authorised staff only Record administration - authorised staff only