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Labor market institutions and wage setting. Empirical evidence for OECD countries
| Content Provider | Semantic Scholar |
|---|---|
| Author | Podrecca, Elena |
| Copyright Year | 2005 |
| Abstract | One of the main channels through which labour market institutions are supposed to work in determining macroeconomic performance, and the unemployment rate in particular, is trough their effects on the key parameters of the wage curve, particularly the responsiveness of the real wage to the unemployment rate. The question this paper addresses is whether empirical evidence for OECD countries tends to support this particular transmission mechanism. The analysis involves two steps. First, the methodology suggested by Pesaran, Shin and Smith (2001) is applied to time series data for each of 20 OECD countries over the period 1960-1999, in order to test for the existence of a long run level relationship between the real wage and the set of explanatory variables indicated by the theory, and to estimate the parameters of such long run wage curve for each country. Second, the relationship between the estimated wage elasticities to unemployment and a set of labour market institutions of regulatory nature which are supposed to influence such parameter (in particular benefit replacement rates and benefit duration, bargaining coordination, union density and employment protection) is investigated in a cross-country framework. Overall, the analysis finds little support for the role of labor market institutions in explaining inter-country differences in the responsiveness of the real wage to unemployment. None of the institutional variables considered has any significant effect whatsoever on the estimated responses of the real wage to unemployment when considering the whole cross-section sample of 20 OECD countries. When restricting the attention to smaller groups of countries, there is some evidence that benefit duration tends to lowe r the unemployment elasticity of the real wage, and that bargaining coordination and employment protection do have some significant effects, which are, however the opposite of what one would normally expect: real wages are more responsive to unemployment in countries with a lower degree of bargaining coordination and an higher degree of employment protection. |
| File Format | PDF HTM / HTML |
| Alternate Webpage(s) | http://www.aiel.it/Old/bacheca/ROMA/Free_contributions/Retribuzioni/podrecca.pdf |
| Language | English |
| Access Restriction | Open |
| Content Type | Text |
| Resource Type | Article |
