Converging divergence: How competitive advantages condition institutional change under EMU

Abstract

Recognizing that the institutional design of EMU leads to the co-ordination of national wage-bargaining structures, this article asks why bargaining systems in some EMU Member States have become co-ordinated and centralized, whereas others have become co-ordinated and decentralized. In contrast to neoliberal theory, it is argued that different bargaining levels are best explained by a country's competitive advantage: whilst countries with a competitive advantage in high-quality manufacturing favour a centralized bargaining system which supports a high-skill strategy, countries with a competitive advantage in low-cost production prefer decentralized bargaining structures which accommodate high wage differentials within the various employment categories of an industry. Thus, even though EMU asserts unilateral pressure for institutional change, it does not lead to the convergence of national institutions. © Blackwell Publishing Ltd 2005.