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Which Democracies Pay Higher Wages?

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  • James Rockey
  • Miltiadis Makris

Abstract

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.

Suggested Citation

  • James Rockey & Miltiadis Makris, 2010. "Which Democracies Pay Higher Wages?," Discussion Papers in Economics 11/09, Division of Economics, School of Business, University of Leicester.
  • Handle: RePEc:lec:leecon:11/09
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    1. Rockey, James, 2012. "Reconsidering the fiscal effects of constitutions," European Journal of Political Economy, Elsevier, vol. 28(3), pages 313-323.

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    More about this item

    Keywords

    Fertility; Economic growth; Health expenditures;
    All these keywords.

    JEL classification:

    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General

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