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Wage Dispersion and Labour Market Institutions: A Cross Country Study

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  • Michael Coelli

    (Reserve Bank of Australia)

  • Jerome Fahrer

    (Reserve Bank of Australia)

  • Holly Lindsay

    (Reserve Bank of Australia)

Abstract

This paper examines the issue of wage flexibility in an international context using sectoral wage dispersion data from fourteen OECD countries. An emphasis is placed on the evaluation of Australian institutions and data. We draw comparisons between a measure of wage dispersion and the degree of centralisation of a country’s wage setting institution to determine whether decentralised wage setting institutions are necessarily associated with more flexible wages. Inter-country comparisons are drawn among the levels of wage dispersion over time, and the relationship between wages and demand conditions for labour, including productivity and relative prices, are examined. We observe that no strong systematic relationship exists between wage dispersion and the degree of centralisation of labour market institutions. We also find that relative to most other OECD countries for which data are available, Australian wages were strongly correlated both with labour demand conditions and productivity growth over the period 1975–90.

Suggested Citation

  • Michael Coelli & Jerome Fahrer & Holly Lindsay, 1994. "Wage Dispersion and Labour Market Institutions: A Cross Country Study," RBA Research Discussion Papers rdp9404, Reserve Bank of Australia.
    • Handle: RePEc:rba:rbardp:rdp9404
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    File URL: https://www.rba.gov.au/publications/rdp/1994/pdf/rdp9404.pdf
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    References listed on IDEAS

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    1. repec:bla:ecorec:v:62:y:1986:i:179:p:415-26 is not listed on IDEAS
    2. Soskice, David, 1990. "Wage Determination: The Changing Role of Institutions in Advanced Industrialized Countries," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 6(4), pages 36-61, Winter.
    3. repec:bla:ecorec:v:59:y:1983:i:167:p:384-97 is not listed on IDEAS
    4. G. Withers & D. Pitman & B. Whittingham, 1986. "Wage Adjustments and Labour Market Systems: A Cross‐Country Analysis," The Economic Record, The Economic Society of Australia, vol. 62(4), pages 415-426, December.
    5. Jeffrey Carmichael & Nigel Dews, 1987. "The Role and Consequences of Investment in Recent Australian Economic Growth," RBA Research Discussion Papers rdp8704, Reserve Bank of Australia.
    6. Nickell, Stephen J, 1990. "Unemployment: A Survey," Economic Journal, Royal Economic Society, vol. 100(401), pages 391-439, June.
    7. Lars Calmfors, 1993. "Centralisation of Wage Bargaining and Macroeconomic Performance: A Survey," OECD Economics Department Working Papers 131, OECD Publishing.
    8. Michael Keating, 1983. "Relative Wages and the Changing Industrial Distribution of Employment in Australia," The Economic Record, The Economic Society of Australia, vol. 59(4), pages 384-397, December.
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    Cited by:

    1. James Ted McDonald & Christopher Worswick, 2000. "Earnings and Employment Probabilities of Men by Education and Birth Cohort, 1982-96: Evidence for the United States, Canada and Australia," Carleton Economic Papers 00-04, Carleton University, Department of Economics.
    2. Gilles Mourre, 2005. "Wage compression and employment in Europe: First evidence from the structure of earnings survey 2002," European Economy - Economic Papers 2008 - 2015 232, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    3. John Freebairn, 1998. "Microeconomics of the Australian Labour Market," RBA Annual Conference Volume (Discontinued), in: Guy Debelle & Jeff Borland (ed.),Unemployment and the Australian Labour Market, Reserve Bank of Australia.
    4. Jerome Fahrer & Andrew Pease, 1994. "International Trade and the Australian Labour Market," RBA Annual Conference Volume (Discontinued), in: Philip Lowe & Jacqueline Dwyer (ed.),International Intergration of the Australian Economy, Reserve Bank of Australia.
    5. DREGER, Christian & REIMERS, Hans-Eggert, 2011. "On The Role Of Sectoral And National Wage Components In The Wage Bargaining Process," Regional and Sectoral Economic Studies, Euro-American Association of Economic Development, vol. 11(1).
    6. Salverda, Wiemer & Checchi, Daniele, 2014. "Labour-Market Institutions and the Dispersion of Wage Earnings," IZA Discussion Papers 8220, Institute of Labor Economics (IZA).
    7. Dreger, Christian & Reimers, Hans-Eggert, 2010. "On the Role of Sectoral and National Components in the Wage Bargaining Process," IZA Discussion Papers 4908, Institute of Labor Economics (IZA).

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