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Which Democracies Pay Higher Wages?

  • James Rockey


  • Miltiadis Makris


The labor share of income varies markedly across the set of democracies. A model of the political process, situated in a simple macroeconomic environment is analyzed in which the cause of this variation is linked to differences in the form of democracy - in particular the adoption of a presidential or parliamentary system. Presidential regimes are associated with lower taxation but lower wages. Robust evidence for the negative impact of a presidential system on the labor share is obtained using a Bayesian Model Averaging approach. Evidence is also provided that this is due to lower taxation.

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Paper provided by Department of Economics, University of Leicester in its series Discussion Papers in Economics with number 11/09.

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Date of creation: Nov 2010
Date of revision:
Handle: RePEc:lec:leecon:11/09
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