Productivity-wage nexus at the firm-level in Portugal: Decoupling and divergences

Alexandre Mergulhão and José Azevedo Pereira

No 28, OECD Productivity Working Papers from OECD Publishing

Abstract: There is a growing international concern about the slowdown in productivity growth, especially as labor productivity enhancements are important drivers of higher generalised living standards. Using administrative data of firms in Portugal between 2010 and 2016, we analyse the relationships between productivity and wages. At odds with neoclassical theory of marginal productivity of labor, we find that two thirds of firms insufficiently raised wages given observed productivity growth. Employing unconditional quantile regressions, we investigate some quantifiable determinants of the productivity-wage gap at different parts of the distributions. Most of the documented dynamics contributed not only to the divergence of productivity and wages but also to the decoupling of productivity and wage growth. We argue that labor market flexibilisation intensified segmentation, providing incentives for non standard contracts. Both dimensions, as well as higher board compensations, international trade and on-the-job training weakened the link between productivity and wages.

Keywords: compensation; income distribution; Productivity; public policy; Quantile regressions; wage share (search for similar items in EconPapers)
JEL-codes: C3 D2 D31 D33 J31 J38 (search for similar items in EconPapers)
Date: 2021-10-18
New Economics Papers: this item is included in nep-bec, nep-eff, nep-eur, nep-hrm and nep-lma
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Persistent link: https://EconPapers.repec.org/RePEc:oec:ecoaac:28-en

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