Are the degree of trade openness and the degree of wage centralisation negatively correlated?

Abstract

This paper presents evidence of a negative correlation between the degree of wage centralisation and the degree of trade openness, which is taken as a proxy measures of international trade integration. The sample data cover a macro-panel of 17 OECD countries over the 1975–2000 period. The results are robust to alternative estimation methods and after controlling for the endogeneity of the degree of openness. This contrasts with the existing empirical evidence, based on cross-country macroeconomic data, suggesting that more open economies have more centralised wage bargaining institutions on average.