Abstract
This paper proposes an empirical analysis about the influence of some institutional factors (taxation, active and passive labor market policies, labor and goods market regulation and unions’ participation) on the component of the wage growth not explained by the productivity growth (WP gap, thereafter). We consider a 14 OECD countries Panel Data over the period 1983-2003, using four different estimations: fixed effects vector decomposition (FEVD), fixed effects (FE), random effects (RE) and feasible general least square (FGLS). Results for all estimations show that the WP gap is affected by tax wedge, active labor market policies, employment protection for temporary workers and union density, while product market regulation and passive labor market policies do not play a significant role.
Highlights
Starting from the Eighties, Italy and most of the European countries have been involved in significant reforms in labor and goods market, aiming to modify the mechanism of price formation, the degree of labor and product market rigidity, the incidence of taxation and the bargaining process between unions and firms
This paper proposes an empirical analysis about the influence of some institutional factors on the component of the wage growth not explained by the productivity growth (WP gap, thereafter)
A reduction in the tax wedge produces a wage moderation from the supply side because part of the earnings lost can be recovered by the lower tax; 2) the union density is significant with a negative sign: strong union power does not lead to a rise in the wage-productivity gap
Summary
Starting from the Eighties, Italy and most of the European countries have been involved in significant reforms in labor and goods market, aiming to modify the mechanism of price formation, the degree of labor and product market rigidity, the incidence of taxation and the bargaining process between unions and firms. In this paper we analyze from the empirical point of view the effects of these institutional changes on the share of wage growth not explained by the productivity growth (WP gap, thereafter). Some authors focus their attention on the role of some institutional factors affecting productivity. [3] proposes an empirical investigation about the effects of labor market deregulation on productivity growth. They highlight that a deregulation not accompanied by the support for dismissal workers, could affect negatively productivity and GDP growth
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