Wage Formation, Investment and Growth in the Netherlands in the Post-War Period: A Cross-Section Analysis

**Below is a description of the paper and not the actual abstract.** Eichengreen attributes the Western European post-war output growth experience largely to national and international consensus on the side of unions and entrepreneurs about the importance of wage moderation. On the one hand, trade unions may be expected to only accept high profit margins in high labor productivity sectors if they have sufficient confidence that these profits will be invested domestically. On the other hand, entrepreneurs will only be inclined to invest their profits domestically if they are confident that the moderate wage increases will continue in the future. The aim of this note is firstly to examine whether there is evidence in the Netherlands in favor of the assumed behavioral relationships during the early decades after the Second World War and, secondly, to investigate whether these relationships ceased to exist after the early 1970s. Our findings suggest that investment only depended on profits in the 1960s, whereas in the 1950s demand growth seems to have been the dominant determinant; furthermore, wage differences between sectors of industry in these decades exceeded the respective differences in labor productivity. Both characteristics undermine Eichengreen's formulation of the coordination problems as faced by employers and unions. The results in the post-1970 period are also at odds with his thesis.