Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/110084
Authors: 
Agudelo, Sonia A.
Sala, Hector
Year of Publication: 
2015
Series/Report no.: 
IZA Discussion Papers 8945
Abstract: 
We show that wage setting in the Colombian manufacturing industry is not fundamentally driven by labor productivity in contrast to the standard theoretical prediction. On the contrary, internal institutional arrangements – payroll taxation, the minimum wage or the price wedge between manufacturing and consumption prices – together with a higher exposure to international trade – connected to the increasing globalization of the Colombian economy – appear as the crucial drivers. These findings lead us to question the political strategy followed to attain cost competitiveness in a context of growing exposure to international trade. Implementation of a true wage bargaining system is suggested as a critical policy target to prevent the disruptive economic consequences of the current wage setting mechanism and help rebalance the trade deficit.
Subjects: 
wage setting
labor productivity
trade openness
payroll taxes
minimum wages
price wedge
JEL: 
J30
F16
J31
Document Type: 
Working Paper

Files in This Item:
File
Size
369.92 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.