Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/194364
Authors: 
Kollintzas, Tryphon
Papageorgiou, Dimitris
Tsionas, Efthymios
Vassilatos, Vanghelis
Year of Publication: 
2018
Citation: 
[Journal:] IZA Journal of Labor Policy [ISSN:] 2193-9004 [Volume:] 7 [Year:] 2018 [Issue:] 1 [Pages:] 1-43
Abstract: 
In this paper, using a dynamic panel of 21 OECD countries, we find that, unlike the other OECD countries in the sample, wage setting institutions, competition conditions, public finances, and external imbalances can account for the behavior of the public sector wage premium (WPR) and the self-employed taxation gap (TSL) in Greece and to a lesser extent in Spain and Portugal, in a manner that is consistent with an 'insider-outsider society' (IOS). That is, a politicoeconomic system characterized by groups of selfish elites that enjoy market power but at the same time cooperate in influencing government in protecting and promoting their collective self-interests. Then, we find that for Greece as well as Spain and Portugal, WPR and TSL have an adverse effect on both TFP and output growth. Finally, the effect of WPR and TSL on the business cycle (shock propagation mechanism) is investigated via a panel VAR analysis. Again, impulse response function analysis suggests that the shock propagation mechanisms of WPR and TSL for Greece and to a lesser extent for Spain and Portugal are quite different from the rest of the OECD countries. For example, in Greece, unlike the other OECD countries in the sample, a positive temporary shock in WPR causes TFP and output to fall and the public and current account deficits to increase. We take the TFP/output growth and the shock propagation mechanism results to provide strong evidence that Greece and to a lesser extent Spain and Portugal behave like IOS. For that matter, these results are important in order to understand the Greek crisis.
Subjects: 
Labor market institutions
Political institutions
Public sector wage premium
Self-employed taxation gap
Growth
Business cycles
Greek crisis
JEL: 
J44
J45
O43
O47
O57
P16
Persistent Identifier of the first edition: 
Creative Commons License: 
https://creativecommons.org/licenses/by/4.0/
Document Type: 
Article

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