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Does Institutional Diversity Account for Pay Rules in Germany and Belgium?

  • Kampelmann, Stephan


    (Free University of Brussels)

  • Rycx, Francois


    (Free University of Brussels)

This paper examines the relationship between institutions and the remuneration of different jobs by comparing the German and Belgian labour markets with respect to a typology of institutions (social representations, norms, conventions, legislation, and organisations). The observed institutional differences between the two countries lead to the hypotheses of (I) higher overall pay inequality in Germany; (II) higher pay inequalities between employees and workers in Belgium; and (III) higher (lower) impact of educational credentials (work-post tenure) on earnings in Germany. We provide survey-based empirical evidence supporting hypotheses I and III, but find no evidence for hypothesis II. These results underline the importance of institutional details: although Germany and Belgium belong to the same "variety of capitalism", we provide evidence that small institutional disparities within Continental-European capitalism account for distinct structures of pay.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6010.

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Length: 37 pages
Date of creation: Oct 2011
Date of revision:
Publication status: published in: Socio-Economic Review, 2013, 11 (1), 131-157
Handle: RePEc:iza:izadps:dp6010
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  1. Blau, Francine D. & Kahn, Lawrence M., 1999. "Institutions and laws in the labor market," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 25, pages 1399-1461 Elsevier.
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  5. Richard B. Freeman, 1996. "Labor market institutions and earnings inequality," New England Economic Review, Federal Reserve Bank of Boston, issue May, pages 157-172.
  6. Michael Rusinek & François Rycx, 2008. "Rent-sharing under different bargaining regimes: evidence from linked employer-employee data," DULBEA Working Papers 08-09.RS, ULB -- Universite Libre de Bruxelles.
  7. Brunello, Giorgio & Comi, Simona, 2004. "Education and earnings growth: evidence from 11 European countries," Economics of Education Review, Elsevier, vol. 23(1), pages 75-83, February.
  8. Du Caju, Philip & Rycx, François & Tojerow, Ilan, 2009. "Inter-industry wage differentials: how much does rent sharing matter?," Working Paper Series 1103, European Central Bank.
  9. Fuss, Catherine, 2009. "What is the most flexible component of wage bill adjustment? Evidence from Belgium," Labour Economics, Elsevier, vol. 16(3), pages 320-329, June.
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  14. Katharine G. Abraham & Susan N. Houseman, 1994. "Does Employment Protection Inhibit Labor Market Flexibility? Lessons from Germany, France, and Belgium," Book chapters authored by Upjohn Institute researchers, in: Rebecca M. Blank (ed.), Social Protection Versus Economic Flexibility: Is There a Trade-off?, pages 59-93 W.E. Upjohn Institute for Employment Research.
  15. Benito, Andrew, 2000. " Inter-industry Wage Differentials in Great Britain," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 62(0), pages 727-46, Special I.
  16. repec:oup:restud:v:59:y:1992:i:3:p:515-35 is not listed on IDEAS
  17. Orsetta Causa & Sophie Dantan & Åsa Johansson, 2009. "Intergenerational Social Mobility in European OECD Countries," OECD Economics Department Working Papers 709, OECD Publishing.
  18. Nickell, Stephen & Layard, Richard, 1999. "Labor market institutions and economic performance," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 46, pages 3029-3084 Elsevier.
  19. Aoki, Masahiko, 2007. "Endogenizing institutions and institutional changes," Journal of Institutional Economics, Cambridge University Press, vol. 3(01), pages 1-31, April.
  20. Iga Magda & François Rycx & Ilan Tojerow & Daphné Valsamis, 2011. "Wage differentials across sectors in Europe," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 19(4), pages 749-769, October.
  21. Stephan Kampelmann, 2009. "Inequality Measures as Conventions: New Interpretations of a Classic Operationalization Problem," ULB Institutional Repository 2013/109410, ULB -- Universite Libre de Bruxelles.
  22. Jean Verly, 2003. "La décentralisation des relations collectives de travail," Reflets et perspectives de la vie économique, De Boeck Université, vol. 0(4), pages 23-34.
  23. Krueger, Alan B & Summers, Lawrence H, 1988. "Efficiency Wages and the Inter-industry Wage Structure," Econometrica, Econometric Society, vol. 56(2), pages 259-93, March.
  24. Halvorsen, Robert & Palmquist, Raymond, 1980. "The Interpretation of Dummy Variables in Semilogarithmic Equations," American Economic Review, American Economic Association, vol. 70(3), pages 474-75, June.
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  26. Marsden, David, 1999. "A Theory of Employment Systems: Micro-Foundations of Societal Diversity," OUP Catalogue, Oxford University Press, number 9780198294221, July.
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