Democracies Pay Higher Wages

Dani Rodrik

The Quarterly Journal of Economics, 1999, vol. 114, issue 3, 707-738

Abstract: Controlling for labor productivity, income levels, and other possible determinants, there is a robust and statistically significant association between the extent of democracy and the level of manufacturing wages in a country. The association exists both across countries and over time within countries. The coefficient estimates suggest that nonnegligible wage improvements result from the enhancement of democratic institutions: average wages in a country like Mexico would be expected to increase by 10 to 40 percent if Mexico were to attain a level of democracy comparable to that prevailing in the United States. Political competition and participation seem to be the driving force behind the result.

Date: 1999
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Working Paper: Democracies Pay Higher Wages (1998)
Working Paper: Democracies Pay Higher Wages (1998)
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