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Labor Market Institutions and the Industry Wage Distribution: Evidence from Austria, Norway, and the U.S


  • Barth, Erling
  • Zweimuller, Josef


The paper compares the industry wage structures of Austria, Norway, the union sector of the U.S. as well as the non-union sector of the U.S. We make comparable regressions for each country, and are thus able to compare the sectoral earnings patterns controlling for the usual individual characteristics. Our results confirm the hypothesis that the patterns of the inter-industry pay structure is largely independent of labor market institutions: High paying industries in a non-union environment tend to pay high wages also in regimes where bargaining is very centralized and coordinated. This, however, does not mean that collective bargaining does not matter. The influence is mainly on the amount of wage dispersion: We find considerably lower industry pay gaps in centralized Austria and Norway than in decentralized US. Within the US, pay differentials within the union sector slightly exceed those of the non-union sector. The results give support to non-competitive explanations of the labor market. If efficiency wage mechanisms were the reason for wage differentials we would expect central bargainers to internalize these effects. Competitive explanations, on the other hand, would predict no difference between the non-union outcome and a central agreement with the aim of achieving full employment.

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  • Barth, Erling & Zweimuller, Josef, 1992. "Labor Market Institutions and the Industry Wage Distribution: Evidence from Austria, Norway, and the U.S," Institute for Research on Labor and Employment, Working Paper Series qt1811h146, Institute of Industrial Relations, UC Berkeley.
  • Handle: RePEc:cdl:indrel:qt1811h146

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    References listed on IDEAS

    1. Krueger, Alan B & Summers, Lawrence H, 1988. "Efficiency Wages and the Inter-industry Wage Structure," Econometrica, Econometric Society, vol. 56(2), pages 259-293, March.
    2. William T. Dickens & Lawrence F. Katz, 1987. "Inter-Industry Wage Differences and Theories of Wage Determination," NBER Working Papers 2271, National Bureau of Economic Research, Inc.
    3. William T. Dickens, 1986. "Wages, Employment and the Threat of Collective Action by Workers," NBER Working Papers 1856, National Bureau of Economic Research, Inc.
    4. Winter-Ebmer, Rudolf, 1994. "Endogenous Growth, Human Capital, and Industry Wages," Bulletin of Economic Research, Wiley Blackwell, vol. 46(4), pages 289-314, October.
    5. George A. Akerlof, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, Oxford University Press, vol. 97(4), pages 543-569.
    6. Brown, Charles & Medoff, James, 1989. "The Employer Size-Wage Effect," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1027-1059, October.
    7. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-444, June.
    8. Wagner, Joachim, 1990. "An international comparison of sector wage differentials," Economics Letters, Elsevier, vol. 34(1), pages 93-97, September.
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    Cited by:

    1. Du Caju, Philip & Rycx, Francois & Tojerow, Ilan, 2008. "Rent-Sharing and the Cyclicality of Wage Differentials," IZA Discussion Papers 3844, Institute for the Study of Labor (IZA).
    2. 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.
    3. Philip Du Caju & François Rycx & Ilan Tojerow, 2012. "Wage structure effects of international trade in a small open economy: the case of Belgium," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 148(2), pages 297-331, June.
    4. Barth, Erling & Zweimuller, Josef, 1993. "Bargaining Regimes and Wage Dispersion," Institute for Research on Labor and Employment, Working Paper Series qt5w75g2d8, Institute of Industrial Relations, UC Berkeley.
    5. Francine D. Blau & Lawrence M. Kahn, 2003. "Understanding International Differences in the Gender Pay Gap," Journal of Labor Economics, University of Chicago Press, vol. 21(1), pages 106-144, January.
    6. Winter-Ebmer, Rudolf, 1996. "Wage curve, unemployment duration and compensating differentials," Labour Economics, Elsevier, vol. 3(4), pages 425-434, December.
    7. Lawrence Kahn, 2002. "The Impact of Wage-Setting Institutions on the Incidence of Public Employment in the OECD: 1960-98," CESifo Working Paper Series 757, CESifo Group Munich.
    8. Du Caju, Philip & Rycx, François & Tojerow, Ilan, 2011. "Wage structure effects of international trade: evidence from a small open economy," Working Paper Series 1325, European Central Bank.
    9. Wolfgang Pollan, 2009. "How large are wage differentials in Austria?," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 36(4), pages 389-406, November.
    10. Robert Plasman & François Rycx & Ilan Tojerow, 2007. "Wage differentials in Belgium: the role of worker and employer characteristics," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 50(1), pages 11-40.
    11. Barth, Erling, 1992. "Why Do Some Firms Pay More? An Empirical Investigation of Inter-Firm Wage Differentials," Institute for Research on Labor and Employment, Working Paper Series qt7f18t2vt, Institute of Industrial Relations, UC Berkeley.
    12. Björklund, Anders & Bratsberg, Bernt & Eriksson, Tor & Jäntti, Markus & Raaum, Oddbjørn, 2004. "Inter-Industry Wage Differentials and Unobserved Ability: Siblings Evidence from Five Countries," IZA Discussion Papers 1080, Institute for the Study of Labor (IZA).
    13. Amir Borges Ferreira Neto & Ricardo Da Silva Fregugli, 2014. "How Much Does Talent Matter? Evidences From The Brazilian Formal Cultural Industry," Anais do XLI Encontro Nacional de Economia [Proceedings of the 41th Brazilian Economics Meeting] 233, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].


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