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Pay and Productivity in a Corporatist Economy: Evidence from Austria

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Author Info

  • Fuess, Jr., Scott M.

    ()
    (University of Nebraska at Lincoln)

  • Millea, Meghan

    ()
    (Mississippi State University)

Abstract

Conventional theory predicts that productivity gains lead to hikes in real pay. Efficiency wage theory hypothesizes that pay increases can lead to productivity improvements. But would such results be observed in a corporatist economy with centralized bargaining? For the case of Austria, a corporatist archetype, this study uses an innovative technique developed by Geweke to disentangle the relationship between pay and productivity. There already has been empirical evidence that pay demands in corporatist economies are relatively modest. Moreover, it has been claimed that corporatist coordination enhances the efficiency of labor contracts, by providing a mechanism to adjust to aggregate shocks. Our findings uncover another efficiency benefit of corporatism. For laborers in manufacturing, we find that wage hikes result in productivity gains. Managers, then, are rewarded following improvements in productivity.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 244.

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Length: 32 pages
Date of creation: Jan 2001
Date of revision:
Handle: RePEc:iza:izadps:dp244

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Related research

Keywords: efficiency wages; Labor Contracts; corporatism;

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References

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  1. Carmichael, H Lorne, 1990. "Efficiency Wage Models of Unemployment--One View," Economic Inquiry, Western Economic Association International, vol. 28(2), pages 269-95, April.
  2. Akerlof, George A, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, MIT Press, vol. 97(4), pages 543-69, November.
  3. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-72, June.
  4. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
  5. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-38, July.
  6. Salop, Steven C, 1979. "A Model of the Natural Rate of Unemployment," American Economic Review, American Economic Association, vol. 69(1), pages 117-25, March.
  7. Campbell, Carl M, III, 1993. "Do Firms Pay Efficiency Wages? Evidence with Data at the Firm Level," Journal of Labor Economics, University of Chicago Press, vol. 11(3), pages 442-70, July.
  8. Bean, C R & Layard, P R G & Nickell, S J, 1986. "The Rise in Unemployment: A Multi-country Study," Economica, London School of Economics and Political Science, vol. 53(210(S)), pages S1-22, Supplemen.
  9. Pichelmann, Karl & Wagner, Michael, 1986. "Labour Surplus as a Signal for Real-Wage Adjustment: Austria, 1968-1984," Economica, London School of Economics and Political Science, vol. 53(210(S)), pages S75-87, Supplemen.
  10. Cappelli, Peter & Chauvin, Keith, 1991. "An Interplant Test of the Efficiency Wage Hypothesis," The Quarterly Journal of Economics, MIT Press, vol. 106(3), pages 769-87, August.
  11. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
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Cited by:
  1. van Praag, Bernard M. S. & Ferrer-i-Carbonell, Ada, 2001. "Age-Differentiated QALY Losses," IZA Discussion Papers 314, Institute for the Study of Labor (IZA).
  2. Hofer, Helmut & Weber, Andrea, 2001. "Wage Mobility in Austria 1986-1996," Economics Series 108, Institute for Advanced Studies.

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