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Do Interactions between Finance and Labor Market Institutions Affect Wage Distribution?

This article analyzes the linkages between financial liberalization, labor market institutions and wage inequality for 17 OECD countries over the 1989 to 2005 period. With the help of a fixed effect model with an interacted term, one crucial contribution of this article is to analyze the interacted impact of labor market institutions (i.e., workers' bargaining power and employment protection legislation) on the one hand and financial liberalization on the other hand on wage distribution. Our results indicate that changes in workers' bargaining power and in employment protection affect wage distribution (p9/p1 ratio). Estimates of the marginal effects show that by increasing labor markers regulation (i.e., reinforcing workers' bargaining power and increasing employment protection legislation) one also weakens the impact of financial liberalization on the increase in wage inequality.

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File URL: ftp://mse.univ-paris1.fr/pub/mse/CES2012/12089.pdf
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Paper provided by Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne in its series Documents de travail du Centre d'Economie de la Sorbonne with number 12089.

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Length: 32 pages
Date of creation: Dec 2012
Date of revision:
Handle: RePEc:mse:cesdoc:12089
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  1. Bruno Amable & Donatella Gatti, 2004. "Product market competition, job security, and aggregate employment," Oxford Economic Papers, Oxford University Press, vol. 56(4), pages 667-686, October.
  2. Barker, Roger M., 2010. "Corporate Governance, Competition, and Political Parties: Explaining Corporate Governance Change in Europe," OUP Catalogue, Oxford University Press, number 9780199576814.
  3. Philipp Doerrenberg & Andreas Peichl, 2012. "The Impact of Redistributive Policies on Inequality in OECD Countries," Cologne Graduate School Working Paper Series 03-05, Cologne Graduate School in Management, Economics and Social Sciences.
  4. Christopher F Baum & Mark E. Schaffer & Steven Stillman, 2007. "Enhanced routines for instrumental variables/GMM estimation and testing," CERT Discussion Papers 0706, Centre for Economic Reform and Transformation, Heriot Watt University.
  5. Donatella GATTI & Christophe RAULT & Anne-Gaël VAUBOURG, 2009. "Unemployment and finance : how do financial and labour market factors interact ?," Working Papers 101, Orleans Economic Laboratorys, University of Orleans.
  6. Adeline Saillard, 2012. "The role of complementarity and the financial liberalization in the financial crisis," Documents de travail du Centre d'Economie de la Sorbonne 12038, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
  7. Amable, Bruno & Gatti, Donatella & Schumacher, Jan, 2006. "Welfare State Retrenchment: The Partisan Effect Revisited," IZA Discussion Papers 1995, Institute for the Study of Labor (IZA).
  8. Roe, Mark J., 2006. "Political Determinants of Corporate Governance: Political Context, Corporate Impact," OUP Catalogue, Oxford University Press, number 9780199205301.
  9. Daniele Checchi & Cecilia García-Peñalosa, 2008. "Labour market institutions and income inequality," Economic Policy, CEPR;CES;MSH, vol. 23, pages 601-649, October.
  10. Bruno Amable & Lilas Demmou & Donatella Gatti, 2011. "The effect of employment protection and product market regulation on labour market performance: substitution or complementarity?," Applied Economics, Taylor & Francis Journals, vol. 43(4), pages 449-464.
  11. Howard Gospel & Andrew Pendleton, 2003. "Finance, Corporate Governance and the Management of Labour: A Conceptual and Comparative Analysis," British Journal of Industrial Relations, London School of Economics, vol. 41(3), pages 557-582, 09.
  12. Cecilia García-Peñalosa, 2010. "Income distribution, economic growth and European integration," Journal of Economic Inequality, Springer, vol. 8(3), pages 277-292, September.
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