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Pay and Productivity in a Corporatist Economy: Evidence from Austria

Author

Listed:
  • Fuess Jr., Scott M.

    (University of Nebraska-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.

Suggested Citation

  • Fuess Jr., Scott M. & Millea, Meghan, 2001. "Pay and Productivity in a Corporatist Economy: Evidence from Austria," IZA Discussion Papers 244, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp244
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    References listed on IDEAS

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    Cited by:

    1. Hofer, Helmut & Weber, Andrea, 2002. "Wage mobility in Austria 1986-1996," Labour Economics, Elsevier, vol. 9(4), pages 563-577, September.
    2. van Praag, Bernard M. S. & Ferrer-i-Carbonell, Ada, 2001. "Age-Differentiated QALY Losses," IZA Discussion Papers 314, Institute of Labor Economics (IZA).

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    More about this item

    Keywords

    efficiency wages; Labor Contracts; corporatism;
    All these keywords.

    JEL classification:

    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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