Pay and productivity in a corporatist economy: evidence from Austria
Conventional theory predicts that productivity gains lead to hikes in real pay. Efficiency wage theory hypothesizes that pay increases can lead to productivity improvements. But would such results be observed in a corporatist economy with centralized bargaining? For the case of Austria, a corporatist archetype, this study uses an innovative technique developed by Geweke to disentangle the relationship between pay and productivity. There already has been empirical evidence that pay demands in corporatist economies are relatively modest. Moreover, it has been claimed that corporatist coordination enhances the efficiency of labor contracts, by providing a mechanism to adjust to aggregate shocks. Our findings uncover another efficiency benefit of corporatism. For laborers in manufacturing, we find that wage hikes result in productivity gains. Managers, then, are rewarded following improvements in productivity.
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90-percent confidence bands Austrian Central Statistical blue-collar workers centile Central Statistical Office Chamber of Labour Conditional contemporaneous association conditional feedback measures confidence interval conventional labor demand coordination corporatism corporatist economy created 90-percent confidence Cushing and McGarvey data appendix developed by Geweke disentangle Dustmann earnings and productivity Efficiency wage employee earnings equations 4-6 equations 7-9 feedback from pay feedback from productivity feedback point estimate GDP deflator Geweke Feedback Measures Geweke linear feedback Geweke method Implementing the Geweke improvements in productivity impulse response function innovation labor contracts Labor Market labor productivity lmmigrants lmmigration Policy lZA Discussion Papers Österreichisches Statistisches Zentralamt Panel Data Parity Commission pay adjustments pay and productivity pay to productivity percent prediction error variance productivity forecast productivity gains productivity improvements real GDP Republic of Austria salary earnings sampling distribution schillings per month simulated small sample bias Soest Table Teulings and Hartog unemployment ur,A wage earners wage earnings white-collar workers