Skip to main content
Article thumbnail
Location of Repository

How bad is Divergence in the Euro-Zone? Lessons from the United States of America and Germany

By Sebastian Dullien and Ulrich Fritsche


This paper compares relative unit labour cost developments in the countries of the euro-area since the beginning of the European Monetary Union (EMU) both with historical developments and with intra-regional unit labour cost developments in the United States of America and Germany. To this end, unit labour cost indices for the US states and census regions from 1977 to 1997 as well as for the German Länder from 1970 to 2004 have been constructed. Against this benchmark, it is found that unit labour cost increases since 1999 in Portugal and to a lesser extent in Spain and Greece can be judged as excessive, pointing at labour market rigidities which might impair smooth working of EMU in the future.Unit labor costs, divergence, convergence, Euro-zone, inflation

OAI identifier:

Suggested articles


  1. Akerlof (2006), Stabilization Policy: A Reconsideration,
  2. (2003). Deflation: Determinants, Risks, and Policy Options - Findings of an Interdepartmental Task Force,
  3. (1986). Hysteresis and the European Unemployment Problem,
  4. (2006). Is European Monetary Policy Appropriate for the EMU Member Countries? A Counterfactual Analysis,
  5. (2006). Macroeconomics and the Clash of Civilizations, The Globalist, Friday 17, Saint-Paul,
  6. Monetary Policy and Inflation Differentials in a Heterogeneous Currency Area,
  7. (2006). Spain has reason to quit the euro, Financial Times,
  8. (2006). The Caring Hand that Cripples: The East German Labor Market After Reunification, Kiel Institute Working Paper No.
  9. (2006). The Real Effects of EMU,
  10. (2003). The Role of Inflation Differentials in Regional Adjustment: Evidence from the United States,

To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.