IDEAS home Printed from https://ideas.repec.org/a/oup/cesifo/v51y2005i1p47-75..html
   My bibliography  Save this article

Labor Market Institutions, Wages, and Investment: Review and Implications

Author

Listed:
  • Jörn-Steffen Pischke

Abstract

Labor market institutions, via their effect on the wage structure, affect the investment decisions of firms in labor markets with frictions. This observation helps explain rising wage inequality in the US, but a relatively stable wage structure in Europe in the 1980s. These different trends are the result of different investment decisions by firms for the jobs typically held by less skilled workers. Firms in Europe have more incentives to invest in less skilled workers, because minimum wages or union contracts mandate that relatively high wages have to be paid to these workers. I report some empirical evidence for investments in training and physical capital across the Atlantic, which is roughly in line with this theoretical reasoning. (JEL E22, E24, J23, J24, J31)

Suggested Citation

  • Jörn-Steffen Pischke, 2005. "Labor Market Institutions, Wages, and Investment: Review and Implications," CESifo Economic Studies, CESifo, vol. 51(1), pages 47-75.
    • Handle: RePEc:oup:cesifo:v:51:y:2005:i:1:p:47-75.
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1093/cesifo/51.1.47
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Pfeifer, Christian, 2013. "Intra-firm Wage Compression and Cost Coverage of Training: Evidence from Linked Employer-Employee Data," VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 80030, Verein für Socialpolitik / German Economic Association.
    2. Elisabetta Croci Angelini & Francesco Farina, 2007. "Technological choices under institutional constraints: measuring the impact on earnings dispersion," Department of Economic Policy, Finance and Development (DEPFID) University of Siena 006, Department of Economic Policy, Finance and Development (DEPFID), University of Siena.
    3. Adama Messanh COMBEY, 2016. "The Main Determinants of Private Investments in the WAEMU Zone: The Dynamic Approach," Journal of Economics and Political Economy, KSP Journals, vol. 3(4), pages 731-743, December.
    4. Tobias Haepp & Carl Lin, 2017. "How Does the Minimum Wage Affect Firm Investments in Fixed and Human Capital? Evidence from China," Review of Development Economics, Wiley Blackwell, vol. 21(4), pages 1057-1080, November.
    5. Daniel Felsenstein, 2011. "Capital Deepening and Regional Inequality: An Empirical Analysis (refereed paper)," ERSA conference papers ersa10p759, European Regional Science Association.
    6. Joachim Möller, 2008. "Wage dispersion in Germany and the US: is there compression from below?," International Economics and Economic Policy, Springer, vol. 5(4), pages 345-361, December.
    7. Hope, David & Martelli, Angelo, 2019. "The transition to the knowledge economy, labor market institutions, and income inequality in advanced democracies," LSE Research Online Documents on Economics 100382, London School of Economics and Political Science, LSE Library.
    8. Uchenna EFOBI & Xuan VINH VO & Emmanuel ORKOH, 2022. "Are there wages from “sin”? Working conditions spillover from paying bribe in Vietnam," Small Business Economics, Springer, vol. 58(4), pages 1975-1995, April.
    9. Koeniger, Winfried & Leonardi, Marco, 2006. "Capital Deepening and Wage Differentials: Germany vs. US," IZA Discussion Papers 2065, Institute of Labor Economics (IZA).
    10. Veysel Avsar & Gultekin Gollu & Nurgul Sevinc, 2022. "Strict trade measures, flexible financing," Southern Economic Journal, John Wiley & Sons, vol. 88(4), pages 1431-1452, April.
    11. COMBEY, Adama, 2016. "The Main Determinants of Private Investment in The WAEMU Zone: The Dynamic Approach," MPRA Paper 75382, University Library of Munich, Germany.
    12. Michael Beenstock & Daniel Felsenstein & Nadav Ben Zeev, 2011. "Capital deepening and regional inequality: an empirical analysis," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 47(3), pages 599-617, December.
    13. Francis Boadu & Yu Xie & Yi-Fei Du & Elizabeth Dwomo-Fokuo, 2018. "MNEs Subsidiary Training and Development and Firm Innovative Performance: The Moderating Effects of Tacit and Explicit Knowledge Received from Headquarters," Sustainability, MDPI, vol. 10(11), pages 1-25, November.

    More about this item

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:cesifo:v:51:y:2005:i:1:p:47-75.. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Oxford University Press (email available below). General contact details of provider: https://edirc.repec.org/data/cesifde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.