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Institutions and Wage Determination: a Multi-Country Approach

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Author Info
Luca Nunziata () (Nuffield College, Oxford and University of Ancona)

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Abstract

We present an empirical analysis of the determinants of labour cost in OECD countries, with particular reference to the impact of labour market institutions from 1960 to 1994. The main contribution of the paper is to show that labour market regulations can explain a large part of labour cost rise in OECD countries in the last decades once we control for productivity. These results are consistent with the findings of a companion paper (Nickell et al., 2001) where the effects of institutions on unemployment are examined. The model controls for macroeconomic shocks, and include the possibility of interactions among institutions. We present also a discussion of the potential problems encountered when estimating a macro pooled model like ours. We focus, among other things, on the hypothesis of poolability and on the cointegration properties of the model, suggesting a two way fixed effects specification in GLS form that corrects for heteroskedasticity and serial correlation. The explanatory power of the model is finally tested by means of a series of by country dynamic simulations.

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Publisher Info
Paper provided by Economics Group, Nuffield College, University of Oxford in its series Economics Papers with number 2001-W29.

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Length: 33 pages
Date of creation: 07 Dec 2001
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Handle: RePEc:nuf:econwp:0129

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Web page: http://www.nuff.ox.ac.uk/economics/

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Related research
Keywords: Labour Cost Wage Labour Market Institutions Unemployment Multi-Country Regression

Other versions of this item:

Find related papers by JEL classification:
E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

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  3. Lazear, Edward P, 1990. "Job Security Provisions and Employment," The Quarterly Journal of Economics, MIT Press, vol. 105(3), pages 699-726, August. [Downloadable!] (restricted)
  4. Pesaran, M. Hashem & Smith, Ron, 1995. "Estimating long-run relationships from dynamic heterogeneous panels," Journal of Econometrics, Elsevier, vol. 68(1), pages 79-113, July. [Downloadable!] (restricted)
    Other versions:
  5. Francesco Daveri & Guido Tabellini, 2000. "Unemployment, growth and taxation in industrial countries," Economic Policy, CEPR, CES, MSH, vol. 15(30), pages 47-104, 04. [Downloadable!] (restricted)
    Other versions:
  6. Belot, M.V.K. & Ours, J. C. van, 2000. "Does the recent success of some OECD countries in lowering their unemployment rates lie in the clever design of their labour market reforms?," Discussion Paper 40, Tilburg University, Center for Economic Research. [Downloadable!]
    Other versions:
  7. Judson, Ruth A. & Owen, Ann L., 1999. "Estimating dynamic panel data models: a guide for macroeconomists," Economics Letters, Elsevier, vol. 65(1), pages 9-15, October. [Downloadable!] (restricted)
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  9. Alogoskoufis, George & Manning, Alan, 1988. "Wage setting and unemployment persistence in Europe, Japan and the USA," European Economic Review, Elsevier, vol. 32(2-3), pages 698-706, March. [Downloadable!] (restricted)
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    Other versions:
  12. Nickell, S. & Layard, R., 1997. "Labour Market Institutions and Economic Performance," Papers 23, Centre for Economic Performance & Institute of Economics.
    Other versions:
  13. Booth, Alison L & Francesconi, Marco & Zoega, Gylfi, 1999. "Training, Rent-Sharing and Unions," CEPR Discussion Papers 2200, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  14. Nickell, Stephen, 1998. "Unemployment: Questions and Some Answers," Economic Journal, Royal Economic Society, vol. 108(448), pages 802-16, May. [Downloadable!] (restricted)
  15. Luca Nunziata, 2005. "Institutions and Wage Determination: a Multi-country Approach," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 67(4), pages 435-466, 08. [Downloadable!] (restricted)
    Other versions:
  16. Hausman, Jerry A, 1978. "Specification Tests in Econometrics," Econometrica, Econometric Society, vol. 46(6), pages 1251-71, November. [Downloadable!] (restricted)
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  20. Blanchard, Olivier & Wolfers, Justin, 2000. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," Economic Journal, Royal Economic Society, vol. 110(462), pages C1-33, March. [Downloadable!] (restricted)
    Other versions:
  21. Nickell, Stephen, 1997. "Unemployment and Labor Market Rigidities: Europe versus North America," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 55-74, Summer. [Downloadable!] (restricted)
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Luca Nunziata, 2002. "Unemployment, Labour Market Institutions and Shocks," Economics Papers 2002-W16, Economics Group, Nuffield College, University of Oxford. [Downloadable!]
  2. Carsten Ochsen, 2005. "Labour Market Institutions and Unemployment Revisited," Thuenen-Series of Applied Economic Theory 49, University of Rostock, Institute of Economics, Germany. [Downloadable!]
  3. Sebastian Weber, 2006. "Labor Market Structures, Trade and their Effect on Unemployment: A Theoretical Analysis and Empirical Investigation," HEI Working Papers 22-2006, Economics Section, The Graduate Institute of International Studies. [Downloadable!]
  4. L. Nunziata, 2002. "Institutions and Wage Determination: A Multi-Country Approach," Working Papers 433, Dipartimento Scienze Economiche, Università di Bologna. [Downloadable!]
    Other versions:
  5. Hielke Buddelmeyer & Gilles Mourre & Melanie Ward, 2008. "Why do Europeans work part-time? A cross-country Panel Analysis," Working Paper Series 872, European Central Bank. [Downloadable!]
  6. Roger Bjørnstad and Kjartan Øren Kalstad, 2006. "Increased Price Markup from Union Coordination. OECD Panel Evidence," Discussion Papers 470, Research Department of Statistics Norway. [Downloadable!]
  7. Gustavo Gonzaga & Beatriz Muriel & Cristina Terra, 2005. "Abertura Comercial, Desigualdade Salarial E Sindicalização," Anais do XXXIII Encontro Nacional de Economia [Proceedings of the 33th Brazilian Economics Meeting] 073, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics]. [Downloadable!]
  8. Koeniger, Winfried & Leonardi, Marco & Nunziata, Luca, 2004. "Labour Market Institutions and Wage Inequality," IZA Discussion Papers 1291, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  9. Gavin Cameron & Chris Wallace, 2002. "Macroeconomic Performance in the Bretton Woods Era, And After," Economics Series Working Papers 130, University of Oxford, Department of Economics. [Downloadable!]
    Other versions:
  10. Buddelmeyer, Hielke & Mourre, Gilles & Ward, Melanie, 2004. "The Determinants of Part-Time Work in EU Countries: Empirical Investigations with Macro-Panel Data," IZA Discussion Papers 1361, Institute for the Study of Labor (IZA). [Downloadable!]
  11. Christopher Bowdler & Luca Nunziata, 2005. "Trade union density and inflation performance: evidence from OECD panel data," "Marco Fanno" Working Papers 0009, Dipartimento di Scienze Economiche "Marco Fanno". [Downloadable!]
    Other versions:
  12. Nunziata, Luca & Bowdler, Christopher, 2005. "Inflation Adjustment and Labour Market Structures: Evidence from a Multi-Country Study," IZA Discussion Papers 1510, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  13. Xiujian Chen & Shu Lin & W. Robert Reed, 2006. "Another Look at what to do with Time-series Cross-section Data," Working Papers in Economics 06/04, University of Canterbury, Department of Economics. [Downloadable!]
    Other versions:
  14. Jakob de Haan & Jan-Egbert Sturm & Bjorn Volkerink, 2003. "How to Measure the Tax Burden on Labour at the Macro-Level?," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
  15. Roger Bjørnstad and Ragnar Nymoen, 2006. "Will it float? The New Keynesian Phillips curve tested on OECD panel data," Discussion Papers 463, Research Department of Statistics Norway. [Downloadable!]
  16. Christopher Bowdler & Luca Nunziata, 2004. "Labour Markets Institutions and Inflation Performance: Evidence from OECD panel data," Money Macro and Finance (MMF) Research Group Conference 2004 29, Money Macro and Finance Research Group. [Downloadable!]
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