IDEAS home Printed from https://ideas.repec.org/p/aue/wpaper/1104.html
   My bibliography  Save this paper

Excessive Wages and the Return on Capital

Author

Listed:
  • Thomas Moutos

    () (DIEES, AUEB)

  • Sarantis Kalyvitis

    () (DIEES, AUEB)

  • Margarita Katsimi

    () (DIEES, AUEB)

Abstract

Received wisdom suggests that �excessive� wages, defined as the part of real wages that do not follow labour productivity developments, are adversely associated with the return on capital. This paper argues that excessive wages and profits are better thought as responses to changes in the economic, political and institutional environment and there is no a priori reason for a negative relationship between them. We thus investigate whether there is a causal effect of excessive wages on capital return using aggregate panel data for 19 OECD countries for the period 1970-2000. We account for the endogeneity of excessive wages by exploiting variations in institutional and labour market characteristics. Our main finding is that excessive wages do not affect the return on capital. This result remains robust to alternative empirical specifications and to alternative definitions of profitability and excessive wages, and questions the standard advice by international economic organizations on wage moderation.

Suggested Citation

  • Thomas Moutos & Sarantis Kalyvitis & Margarita Katsimi, 2011. "Excessive Wages and the Return on Capital," DEOS Working Papers 1104, Athens University of Economics and Business.
  • Handle: RePEc:aue:wpaper:1104
    as

    Download full text from publisher

    File URL: http://wpa.deos.aueb.gr/docs/Excessive_Wages_and_the_Return_on_Capital_14Oct2010.pdf
    File Function: First version
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Philip Du Caju & François Rycx & Ilan Tojerow, 2011. "Inter‐Industry Wage Differentials: How Much Does Rent Sharing Matter?," Manchester School, University of Manchester, vol. 79(4), pages 691-717, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Georgios Christou & Panagiotis Chronis, 2017. "Markups and fiscal policy: analytical framework and an empirical investigation," Working Papers 221, Bank of Greece.

    More about this item

    Keywords

    capital return; �excessive� wages; productivity; endogeneity.;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aue:wpaper:1104. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekaterini Glynou). General contact details of provider: http://edirc.repec.org/data/diauegr.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.