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Organizational determinants of wage moderation

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  • Lucio Baccaro
  • Marco Simoni
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    Abstract

    This article contributes to the political economic literature regarding the effects of industrial relations institutions on national economic outcomes. Based on an econometric analysis of the determinants of wage moderation in sixteen industrialized countries between 1974 and 2000, it argues that the organizational characteristics of trade unions have a significant impact on wage dynamics. Controlling for a number of institutional and economic factors, the countries in which trade union confederations directly involve workers in the process of collective bargaining ratification have on average lower wage growth relative to productivity than others. The authors also find that collective bargaining coordination and contract ratification magnify each other's wage-dampening effect. Through case studies of Ireland and Italy, the article examines the causal mechanisms underlying the uncovered statistical regularities and concludes that, particularly at a time in which classic political exchange is waning, worker involvement in contract ratification allows confederation leaders to resolve conflicting claims inside their organizations at lower wage levels than are achieved by a less participatory governance process.

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    File URL: http://eprints.lse.ac.uk/33510/
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    Bibliographic Info

    Paper provided by London School of Economics and Political Science, LSE Library in its series LSE Research Online Documents on Economics with number 33510.

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    Date of creation: Oct 2010
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    Publication status: Published in World Politics, October, 2010, 62(4), pp. 594-635 . ISSN: 0043-8871
    Handle: RePEc:ehl:lserod:33510

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    1. Soskice, David, 1990. "Wage Determination: The Changing Role of Institutions in Advanced Industrialized Countries," Oxford Review of Economic Policy, Oxford University Press, vol. 6(4), pages 36-61, Winter.
    2. Farber, Henry S, 1978. "Individual Preferences and Union Wage Determination: The Case of the United Mine Workers," Journal of Political Economy, University of Chicago Press, vol. 86(5), pages 923-42, October.
    3. Martin Hellwig, 2004. "The Relation between Real Wage Rates and Employment: An Intertemporal General- Equilibrium Analysis," German Economic Review, Verein für Socialpolitik, vol. 5(3), pages 263-295, 08.
    4. Baccaro, Lucio & Rei, Diego, 2007. "Institutional Determinants of Unemployment in OECD Countries: Does the Deregulatory View Hold Water?," International Organization, Cambridge University Press, vol. 61(03), pages 527-569, July.
    5. Eichengreen, Barry & Iversen, Torben, 1999. "Institutions and Economic Performance: Evidence from the Labour Market," Oxford Review of Economic Policy, Oxford University Press, vol. 15(4), pages 121-38, Winter.
    6. Anke Hassel, 2003. "The Politics of Social Pacts," British Journal of Industrial Relations, London School of Economics, vol. 41(4), pages 707-726, December.
    7. Layard, Richard & Nickell, Stephen & Jackman, Richard, 1991. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780198284345, Octomber.
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    Cited by:
    1. Fritz W. Scharpf, 2011. "Monetary union, fiscal crisis and the preemption of democracy," LSE Research Online Documents on Economics 53448, London School of Economics and Political Science, LSE Library.
    2. Patrick Lunz, 2013. "What's left of the left? Partisanship and the political economy of labour market reform: why has the social democratic party in Germany liberalised labour markets?," Europe in Question Discussion Paper Series of the London School of Economics (LEQs) 5, London School of Economics / European Institute.
    3. Scharpf, Fritz W., 2011. "Monetary union, fiscal crisis and the preemption of democracy," MPIfG Discussion Paper 11/11, Max Planck Institute for the Study of Societies.
    4. Fritz W. Scharpf, 2011. "Monetary Union, Fiscal Crisis and the Preemption of Democracy," LEQS – LSE 'Europe in Question' Discussion Paper Series 36, European Institute, LSE.
    5. Alison Johnston, 2011. "The revenge of Baumol's cost disease?: monetary union and the rise of public sector wage inflation," LSE Research Online Documents on Economics 53280, London School of Economics and Political Science, LSE Library.

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