Regulation and Wage Premia

University of Nottingham Research Paper No. 2004/26

45 Pages Posted: 2 Aug 2005

See all articles by Sébastien Jean

Sébastien Jean

OECD Economics Department

Giuseppe Nicoletti

Organization for Economic Co-Operation and Development (OECD) - Economics Department (ECO)

Abstract

The paper explores the link between wage premia and the determinants of product market rents. We first estimate 2-digit industry premia from 1996 wage earnings data by category of worker (age, sex, education and type of contract) in 10 European countries, the US and Canada. Using industry-specific regulation data, we then look at the effects of restrictions to competition and public ownership on wage premia in non-manufacturing industries, where regulatory conditions vary the most and are better documented. We find that, given workers' bargaining power, anticompetitive regulations significantly increase wage premia, reflecting the presence of rents. However, premia decline in industries dominated by legal public monopolies, suggesting a hump-shaped relationship between regulation and premia. We show that the hump-shape is consistent with a model of non-pecuniary rent-sharing between workers and a populist public monopolist.

Keywords: Regulation, competition, wage premia, rent-sharing, panel data

JEL Classification: J31, L51, C23

Suggested Citation

Jean, Sébastien and Nicoletti, Giuseppe, Regulation and Wage Premia. University of Nottingham Research Paper No. 2004/26, Available at SSRN: https://ssrn.com/abstract=764166 or http://dx.doi.org/10.2139/ssrn.764166

Sébastien Jean (Contact Author)

OECD Economics Department ( email )

2 rue Andre Pascal
Paris Cedex 16, MO 63108
France

Giuseppe Nicoletti

Organization for Economic Co-Operation and Development (OECD) - Economics Department (ECO) ( email )

2 rue Andre Pascal
Paris Cedex 16, MO 63108
France
+33 1 4524 8730 (Phone)
+33 1 4524 1347 (Fax)

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