Wage-setting institutions and corporate governance

Matthew Dimick () and Neel Rao

Journal of Comparative Economics, 2016, vol. 44, issue 4, 854-883

Abstract: We present a model in which wage-setting structures explain cross-country variation in corporate governance. The model predicts a nonmonotonic relationship between the level of centralization in wage-bargaining institutions and the levels of firm ownership concentration and investor protection legislation. Low and high degrees of centralization yield less concentrated ownership and more investor protection than intermediate degrees. Like recent research, this paper highlights labor as a key constituent in shaping corporate governance. However, our theory can resolve an important puzzle this research confronts, namely, why Scandinavian countries with higher than average labor strength also have higher than average investor protection legislation.

Keywords: Corporate governance; Bargaining centralization; Wage-setting institutions; Legal origin; Labor movements (search for similar items in EconPapers)
JEL-codes: G34 K22 K42 (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jcecon:v:44:y:2016:i:4:p:854-883

DOI: 10.1016/j.jce.2016.01.004

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