Baumol and the post-industrial trilemma: examining the relationship between productivity, prices and wages (original) (raw)
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Wage-setting institutions as industrial policy
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Centralized wage setting arrangements compress wage differentials along many dimensions, but how do they affect employment structure? To address this issue, we relate the evolution of U.S.-Swedish differences in the industry distribution of employment to relative wages between and within industries. We find that centralized wage setting shifted Swedish employment away from industries with high wage dispersion among workers, a high mean wage and, especially, a low mean wage. The dissolution of Sweden's centralized wage-setting beginning in 1983 led to widening wage differentials and a reversal in the evolution of U.S.-Swedish differences in industry structure.
Wages , productivity , and market power ∗
2014
We explore relationships between wages, productivity and market power within a framework that captures labor market rigidities, rm heterogeneity, and variable markups. Productivity is only one of the factors that potentially can explain variation of wages within an industry. Another important determinant of wages can be the rm's market power. More precisely, the outcome of the bargaining game between a rm and its workers depends crucially on the demand side characteristics. Hence, rm's markup also may serve as a good explanatory variable for the wage rate set by the rm. We provide a micro foundation for this channel of wage determination. We test our predictions using Ukrainian rm-level data. An increase in productivity weakly increases an average wage within a rm, but the e ect is small and not robust. The elasticity of wage with respect to labor productivity is 0.064 in the baseline speci cation, but the coe cient is not statistically signi cant. An increase in the markup ...
Productivity and Real Wages: Is There a Puzzle?
Brookings Papers on Economic Activity, 1994
IN RECENT PUBLIC DISCUSSION of labor income in the United States, considerable concern has been voiced that real wages are not keeping up with productivity growth (or are declining), that sharply rising fringe benefit costs are undermining gains in take-home pay, and that workers in other countries are enjoying better pay increases than U.S. workers. Two frequently cited measures published by the Bureau of Labor Statistics (BLS), which are shown in figure 1, highlight some of these concerns. The first measure-the growth in real hourly compensation in the nonfarm business sector-has slowed to 0.4 percent a year from 2.4 percent a year over the 1960-73 period. Meanwhile, hourly output per worker has grown at 0.9 percent a year-noticeably faster than hourly compensation, although down considerably from its 1960-73 annual growth rate of 2.5 percent. In an economy where real wage growth has paralleled the rise in productivity over the long run, this apparent divergence implies that the benefits of increased productivity have not been distributed in the expected way over the past two decades. The second BLS measure-real hourly earnings of nonsupervisory employees-excludes employer payments for pension, health care, employment taxes, and other nonwage costs that are counted in real hourly We would like to thank Hilary Sheldon and Kris Mitchener for excellent research assistance and Kathleen Bucholz for helping to prepare the manuscript.
Structural Change and Economic Dynamics, 2012
In a simple one-sector, two-class, fixed-proportions economy, wages are set through axiomatic bargainingà la Nash . As for choice of technology, firms choose the direction of factor augmentations to maximize the rate of unit cost reduction (Kennedy [14], and more recently Funk [10]). The aggregate environment resulting by self-interested decisions made by economic agents is described by a two-dimensional dynamical system in the employment rate and output/capital ratio. The economy converges cyclically to a long-run equilibrium involving a Harrod-neutral profile of technical change, a constant rate of employment of labor, and constant input shares. The type of oscillations predicted by the model matches the available data on the United States . Finally, institutional change, as captured by variations in workers' bargaining power, has a positive effect on the rate of output growth but a negative effect on employment.
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This article investigates how a particular wage-bargaining institution mitigates pressures from growing international competition and new production techniques and affects the degree of wage inequality growth. The extent to which industry-wide wage minima (wage scales) cover both higher and lower skilled workers affects developments in inequality. A series of cross-sectional time-series analyses are conducted using data from a recent unpublished data set from the Organisation for Economic Co-operation and Development (OECD), which covers 14 OECD countries from 1980 to 2002. The results strongly indicate that the presence of industry-wide wage scales is a key factor in the evolution of wage inequality across OECD countries.
Prices and Work in The New Economy
The impetus for this paper is the urgent need is to figure out how a non-growing – even a shrinking – economy may be able to provide human well-being while beginning to restore the health of the natural world. Twentieth century economic theory is not well able to conceptualize this problem, especially since it sees growth as necessary for jobs, jobs necessary for income, and income necessary for well-being. To unwind this chain will require some radical changes in economic theory. The theory must focus on the final goal of human well-being, in the present and the future, prior to the intermediate goals of growth, financial wealth, or the maximization of consumption. Equally critical, and difficult, is to find ways for economic theory to take account of human values, and identify the places where they are more salient than market values, or prices.
Trends in Tariff Reforms and Trends in the Structure of Wages
Sebastian Galiani, Guido G Porto; Trends in Tariff Reforms and in the Structure of Wages. The Review of Economics and Statistics 2010; 92 (3): 482–494. doi: https://doi.org/10.1162/REST\_a\_00003, 2010
This paper provides new evidence on the impacts of trade reforms on wages. Instead of achieving identification by comparing industrial wages before and after one episode of trade liberalization, our strategy exploits the recent historical record of policy changes adopted by Argentina: from significant protection in the early 1970s, to the first episode of liberalization during the late 1970s, back to a slowdown of reforms during the 1980s, to the second episode of liberalization in the 1990s. These swings in trade policy comprise broken trends in trade reforms that we can compare with observed trends in wages and wage inequality. We use unusual historical data sets of trends in tariffs, wages, and wage inequality to examine the structure of wages in Argentina and to explore how it is affected by tariff reforms. We find that i) trade liberalization, ceteris paribus, reduces wages; ii) industry tariffs reduce the industry skill premium; iii) conditional on the structure of tariffs at the industry level, the average tariff in the economy is positively associated with the average skill premium. To explain these results, we present a model that combines a non-competitive wage setting mechanism due to unions with a factor abundance hypothesis. Overall, our work suggests that the observed trends in wage inequality in Latin America can be consistent with the Stolper-Samuelson predictions in a model with unions.