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Taming Global Finance in an Age of Capital? Wage-Setting institutions' mitigating effects on housing bubbles

Johnston, Alison and Regan, Aidan (2015) Taming Global Finance in an Age of Capital? Wage-Setting institutions' mitigating effects on housing bubbles. [Conference Proceedings] (Submitted)

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    Abstract

    Analyses in international political economy (IPE) identify interest rate convergence, magnified in the process of European monetary integration, and financial market liberalization as causal factors behind the rise of house prices. Despite these common credit supply shocks, developed economies experienced heterogeneous trends in housing inflation throughout the 1990s and 2000s. Turning towards demand determinants of housing prices, we focus on whether wage-setting institutions blunt financial liberalization’s impact on housing inflation via their restraining effect on incomes. Employing both a panel regression analysis and a structured comparison of housing developments in Ireland and the Netherlands, we uncover two findings. First, income growth is a more important predictor of housing bubbles across OECD economies than financial variables (although income’s impact on house prices is severely mitigated for the United States). Second, countries with coordinated labor market institutions that grant political coalitions in the export sector veto powers over non-tradable sector interests, realize more restrained income growth and, in turn, are less prone to housing bubbles.

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    Item Type: Conference Proceedings
    Subjects for non-EU documents: EU policies and themes > External relations > international economy
    Subjects for EU documents: UNSPECIFIED
    EU Series and Periodicals: UNSPECIFIED
    EU Annual Reports: UNSPECIFIED
    Conference: European Union Studies Association (EUSA) > Biennial Conference > 2015 (14th), March 4-7, 2015
    Depositing User: Phil Wilkin
    Official EU Document: No
    Language: English
    Date Deposited: 06 Mar 2018 16:56
    Number of Pages: 35
    Last Modified: 06 Mar 2018 16:56
    URI: http://aei.pitt.edu/id/eprint/79366

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