Democracies Pay Higher Wages
CEPR Discussion Paper Series No. 1776
Posted: 27 Jun 1998
Date Written: January 1998
Controlling for labor productivity, income levels, and other possible determinants, there is a robust and statistically significant association between the extent of democratic rights and wages received by workers. The association exists both across countries and over time within countries. The coefficient estimates suggest that non-negligible wage improvements result from the enhancement of democratic institutions: average wages in a country like Mexico would be expected to increase by 10-30% were Mexico to attain a level of democracy comparable to that prevailing in the United States.
JEL Classification: J30, H40, O15
Suggested Citation: Suggested Citation