Wage Moderating Effects of Corporatism: Decentralized versus Centralized Wage Setting in a Union, Firm, Government Context

摘要

Corporatism exerts a moderating influence on the wage gap, the difference between the actual wage rate and the full employment wage rate. Corporatist countries therefore show a lesser degree of unemployment. The paper explores and models one of the reasons why these results might be observed. An important reason for wage moderation is the endogeneity of the wage tax rate for a centralized or encompassing trade union. Centralized trade unions, which are an essential feature of corporatist countries, will realize that a higher gross wage level generally implies higher government expenditures and therefore a higher wage tax rate, which reduces the gains of increasing the gross wage rate. This will moderate their wage claims. Trade unions in a decentralized setting on the other hand will neglect the government budget constraint because the effect of their behavior on net government expenditures is very small for every single trade union. It is shown that both gross and net wages and the unemployment rate are higher in case of decentralized wage setting, whereas the level of economic activity is lower.