| Abstract: | This paper examines the effect of productivity on wages for Spanish industrial sectors by developing a model that captures effects from both sector‐specific and aggregate variables. The results show that a dual behaviour can be inferred, at the sector level, in the wage‐setting mechanism. It is also found that the linkage between wages and productivity varies over time. Some explanations for the increase in wage dispersion are provided, focusing on the increasing decentralisation in wage bargaining after 1986. Finally, we cast some light on the theoretical structure underlying the labour market. |
