Is wage-cost saving labor market deregulation a free lunch? Evidence from 19 OECD countries, 1960-2004

Journal article (2008)
Faculty
Technology, Policy and Management (TPM) (TU Delft)
Copyright: © Kleinknecht and Vergeer
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Published Date

21-04-2008

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Source:

Authorsversion. Publishers version in: Journal of Post Keynesian Economics, Volume 33, Number 2 / Winter 2010-11

Faculty

Technology, Policy and Management

Abstract

Labour productivity growth determines wage growth, but there is also a causal link in the opposite direction. Our panel data analysis of 19 OECD countries (1960-2004) shows that a one-percentage point change in growth rates of real wages corresponds to 0.31 - 0.39 percentage points change in labour productivity growth. This finding casts doubt on the desirability of wage-cost saving flexibilization of European labour markets. The latter may favor job growth but impedes labour productivity growth, which is problematic with an ageing population in Europe.

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