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Market and Political Power Interactions in Greece:An Empirical Investigation

Author

Listed:
  • Tryphon Kollintzas

    (Athens University of Economics and Business and CEPR)

  • Dimitris Papageorgiou

    (Bank of Greece, Economic Analysis and Research Department)

  • Efthymios Tsionas

    (Athens University of Economics and Business)

  • Vanghelis Vassilatos

    (Athens University of Economics and Business)

Abstract

In this paper, using a dynamic panel of 21 OECD countries, we find that, unlike the other OECD countries in the sample, wage setting institutions, competition conditions, public finances and external imbalances can account for the behavior of the public sector wage premium (WPR) and the self employed taxation gap (TSL) in Greece and to a lesser extent in Spain and Portugal, in a manner that is consistent with an “insiders-outsiders society” (IOS). That is, a politicoeconomic system characterized by groups of selfish elites that enjoy market power, but at the same time coope- rate in influencing government in protecting and promoting their collective self interests. Then, we find that for Greece as well as Spain and Portugal, WPR and TSL have an adverse effect on both TFP and output growth. Finally, the effect of WPR and TSL on the business cycle (shock propagation mecha- nism) is investigated via a panel VAR analysis. Again, impulse response function analysis suggests that the shock propagation mechanism of WPR and TSL for Greece and to a lesser extent for Spain and Portugal, are quite different from the rest of the OECD countries. For example, in Greece, unlike the other OECD countries in the sample, a positive temporary shock in WPR causes TFP and output to fall and the public and current account deficits to increase. We take the TFP/output growth and the shock propagation mechanism results to provide strong evidence that Greece and to a lesser extent Spain and Portugal behave like IOS. For that matter, these results are important in order to under- stand the Greek crisis.

Suggested Citation

  • Tryphon Kollintzas & Dimitris Papageorgiou & Efthymios Tsionas & Vanghelis Vassilatos, 2016. "Market and Political Power Interactions in Greece:An Empirical Investigation," Working Papers 201606, Athens University Of Economics and Business, Department of Economics.
  • Handle: RePEc:aeb:wpaper:201606:y:2016
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    References listed on IDEAS

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    1. repec:eee:poleco:v:53:y:2018:i:c:p:59-83 is not listed on IDEAS
    2. repec:zbw:ifweej:201911 is not listed on IDEAS
    3. Kollintzas, Tryphon & Papageorgiou, Dimitris & Vassilatos, Vanghelis, 2018. "Market and political power interactions in Greece: A theory," European Journal of Political Economy, Elsevier, vol. 53(C), pages 59-83.

    More about this item

    Keywords

    Labor market institutions; Political Institutions; Public sector wage premium; Self employed taxation gap; Growth; Business cycles; Greek crisis;

    JEL classification:

    • J44 - Labor and Demographic Economics - - Particular Labor Markets - - - Professional Labor Markets and Occupations
    • J45 - Labor and Demographic Economics - - Particular Labor Markets - - - Public Sector Labor Markets
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries
    • P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism

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