Does Institutional Diversity Account for Pay Rules in Germany and Belgium?
Université Libre de Bruxelles (ULB)
Université Libre de Bruxelles (ULB) - Department of Applied Economics (DULBEA); Institute for the Study of Labor (IZA)
IZA Discussion Paper No. 6010
This paper examines the relationship between institutions and the remuneration of different jobs by comparing the German and Belgian labour markets with respect to a typology of institutions (social representations, norms, conventions, legislation, and organisations). The observed institutional differences between the two countries lead to the hypotheses of (I) higher overall pay inequality in Germany; (II) higher pay inequalities between employees and workers in Belgium; and (III) higher (lower) impact of educational credentials (work-post tenure) on earnings in Germany. We provide survey-based empirical evidence supporting hypotheses I and III, but find no evidence for hypothesis II. These results underline the importance of institutional details: although Germany and Belgium belong to the same "variety of capitalism", we provide evidence that small institutional disparities within Continental-European capitalism account for distinct structures of pay.
Number of Pages in PDF File: 37
Keywords: labour market institutions, wage inequality, rules, collective bargaining
JEL Classification: J31, J51, J52, J53working papers series
Date posted: October 16, 2011
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