Taxation, Labor Policies and Goods Market Regulation: Effects on Wages and Productivity

This paper has as main topic an empirical analysis about the influence of some institutional factors - like taxation, active and passive policies on the labor market, the degree of competition in the goods market, the unions’ role during wage bargaining - on a dependent variable called wage gap. This last variable represents the difference between real wages growth rate and the productivity growth. The study is relied on a Panel relative to 14 OECD countries considering the years from 1983-2003. The estimator utilized is the fixed effects vector decomposition (FEVD). The results obtained displayed that the wage gap is mostly affected by taxes, by active and passive policies on the labor market and by the magnitude of the unions. Thus institutions, which have a role on goods and labor market like employment protection legislation (EPL) and the product market regulation (PMR), do not affect the dependent variable. Then, we estimate the sample dividing the countries in two groups depending on the degree of centralization of the bargaining. The results reached do not change: the EPL and the PMR do not have a role in conditioning the wage gap.