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Product market regulation and wage premia in Europe and North America: An empirical investigation11CEPII and OECD Economics Department, respectively. The authors wish to thank Andrea Bassanini, Ekkehard Ernst, Jørgen Elmeskov, John Martin and participants to the 3rd ECB Labour Market Workshop on “How are wages determined in Europe” for their comments on previous versions of this paper. The views expressed in the paper are personal and do not engage the organisations to which the authors are affiliated

Author

Listed:
  • Jean, Sébastien
  • Nicoletti, Giuseppe

Abstract

The paper explores the link between wage premia and the determinants of product market rents. We first estimate 2-digit industry premia from 1996 wage earnings data by category of worker (age, sex, education and type of contract) in 10 European countries, the US and Canada. Using industry-specific regulation data, we then look at the effects of restrictions to competition and public ownership on wage premia in non-manufacturing industries, where regulatory conditions vary the most and are better documented. We find that, given workers׳ bargaining power, anticompetitive regulations significantly increase wage premia, reflecting the presence of rents. However, premia decline in industries dominated by legal public monopolies, suggesting a hump-shaped relationship between regulation and premia. We show that the hump-shape is consistent with a model of non-pecuniary rent-sharing between workers and a populist public monopolist.

Suggested Citation

  • Jean, Sébastien & Nicoletti, Giuseppe, 2015. "Product market regulation and wage premia in Europe and North America: An empirical investigation11CEPII and OECD Economics Department, respectively. The authors wish to thank Andrea Bassanini, Ekkeha," International Economics, Elsevier, vol. 144(C), pages 1-28.
    • Handle: RePEc:eee:inteco:v:144:y:2015:i:c:p:1-28
    DOI: 10.1016/j.inteco.2015.04.005
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    More about this item

    Keywords

    Regulation; Competition; Wage premia; Rent-sharing; Panel data;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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