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Do Interactions between Finance and Labor Market Institutions Affect Wage Distribution ?

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  • Thibault Darcillon

    ()
    (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)

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    Abstract

    This article analyzes the linkages between financial liberalization, labor market institutions and wage inequality for 17 OECD countries over the 1989 to 2005 period. With the help of a fixed effect model with an interacted term, one crucial contribution of this article is to analyze the interacted impact of labor market institutions (i.e., workers' bargaining power and employment protection legislation) on the one hand and financial liberalization on the other hand on wage distribution. Our results indicate that changes in workers' bargaining power and in employment protection affect wage distribution (p9/p1 ratio). Estimates of the marginal effects show that by increasing labor markers regulation (i.e., reinforcing workers' bargaining power and increasing employment protection legislation) one also weakens the impact of financial liberalization on the increase in wage inequality.

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    Bibliographic Info

    Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00768908.

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    Date of creation: Dec 2012
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    Handle: RePEc:hal:cesptp:halshs-00768908

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    Related research

    Keywords: Wage inequality; financial liberalization; corporate governance; employment protection; political economy;

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    1. Donatella Gatti & Christophe Rault & Anne-Gael Vaubourg, 2009. "Unemployment and Finance: How do Financial and Labour Market Factors Interact?," CESifo Working Paper Series 2901, CESifo Group Munich.
    2. Roe, Mark J., 2002. "Political Determinants of Corporate Governance: Political Context, Corporate Impact," OUP Catalogue, Oxford University Press, number 9780199240746, September.
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    7. Daniele Checchi & Cecilia García-Peñalosa, 2008. "Labour market institutions and income inequality," Economic Policy, CEPR & CES & MSH, vol. 23, pages 601-649, October.
    8. Howard Gospel & Andrew Pendleton, 2003. "Finance, Corporate Governance and the Management of Labour: A Conceptual and Comparative Analysis," British Journal of Industrial Relations, London School of Economics, vol. 41(3), pages 557-582, 09.
    9. Bruno Amable & Donatella Gatti, 2004. "Product market competition, job security, and aggregate employment," Oxford Economic Papers, Oxford University Press, vol. 56(4), pages 667-686, October.
    10. Bruno Amable & Lilas Demmou & Donatella Gatti, 2011. "The effect of employment protection and product market regulation on labour market performance: substitution or complementarity?," Applied Economics, Taylor & Francis Journals, vol. 43(4), pages 449-464.
    11. Adeline Saillard, 2012. "The role of complementarity and the financial liberalization in the financial crisis," Documents de travail du Centre d'Economie de la Sorbonne 12038, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
    12. Barker, Roger M., 2010. "Corporate Governance, Competition, and Political Parties: Explaining Corporate Governance Change in Europe," OUP Catalogue, Oxford University Press, number 9780199576814, September.
    13. Christopher F Baum & Mark E. Schaffer & Steven Stillman, 2007. "Enhanced routines for instrumental variables/GMM estimation and testing," CERT Discussion Papers 0706, Centre for Economic Reform and Transformation, Heriot Watt University.
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