Labour-market institutions, (un)employment, wages, and growth: theory and data

Oscar Afonso, Ana Maria Bandeira and Manuela Magalhães

Applied Economics, 2018, vol. 50, issue 6, 613-633

Abstract: We analyse the implications of labour-market institutions on wage inequality in favour of skilled labour, on relative unemployment of unskilled labour, and on the economic growth rate in two clusters resulting from 27 OECD countries: Cluster 1, closely related with the Anglo-Saxon model, and Cluster 2, dominated by the Continental-European model. By linking the unskilled wage to the skilled one in Cluster 2, due to the indexation of social benefits to per-capita income, we accommodate the observed paths of the three variables in both clusters between 1991 and 2008: Cluster 1 presents a higher wage inequality in favour of skilled labour, a lower unemployment of the unskilled labour, and a better economic growth rate.

Date: 2018
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DOI: 10.1080/00036846.2017.1332748

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