Are wages and productivity converging simultaneously in Euro-area countries?

A convergence analysis is applied to wages and productivity for Euro-area countries in the period from 1981 to 2001. The results show a reduction in the dispersion of wages and unit labour costs, but not in productivity. Different patterns are found for real and nominal wages: higher levels of inflation in countries with higher growth rates of unit labour costs have caused nominal wages to move towards equalization. Moreover, disparities in all the variables have remained more or less the same since 1997, suggesting that the establishment of a single currency area has not accelerated the process of wage equalization.