Abstract
The determination of contract wages in West Germany is studied within a bargaining framework, taking into account some institutional features of the bargaining system as well as the influence of economic forecasts and wage concepts. Cointegration regressions suggest that in the long run nominal contract wages are linked to prices, productivity (each with a unit elasticity) and unemployment. In addition to these factors, expectational errors concerning the inflation rate during the contract period and changes in the tax wedge affect (real) wage growth in the short run, but these effects seem to be temporary rather than permanent.
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