Wage and employment effects of a wage norm |
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| Authors: | Alain de Crombrugghe Gregory de Walque |
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| Institution: | 1. Department of Economics, University of Namur, Rempart de la Vierge 8, B‐5000 Namur, Belgium. E‐mail: alain.decrombrugghe@fundp.ac.be;2. National Bank of Belgium and University of Namur, Bd. de Berlaimont 14, 1000 Bruxelles. E‐mail: gregory.dewalque@nbb.be |
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| Abstract: | Most transition countries used tax‐supported wage norms in the early 1990s, as a part of their market liberalization programmes. This article analyses how a firm‐level tax (or subsidy) on deviations from a pre‐set wage norm may promote employment by rotating the labour demand curve perceived by the workers’ union around the value of the norm. We derive the conditions under which it yields a positive employment effect. We test the effect of the norm on the wages on a sample of Polish firms in 1990 and 1991. The data support the role of the wage norm on the position of the perceived labour demand curve and the role of the tax rate on its slope. |
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| Keywords: | H23 J23 J5 P31 Transition economies labour market unions excess wage tax employment |
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