This paper examines the relationship between institutions and the remuneration of different jobs by comparing the German and Belgian labour markets with respect to a typology of institutions (social representations, norms, conventions, legislation, and organisations). The observed institutional differences between the two countries lead to the hypotheses of (I) higher overall pay inequality in Germany; (II) higher pay inequalities between employees and workers in Belgium; and (III) higher (lower) impact of educational credentials (work-post tenure) on earnings in Germany. We provide survey-based empirical evidence supporting hypotheses I and III, but find no evidence for hypothesis II. These results underline the importance of institutional details: although Germany and Belgium belong to the same variety of capitalism, we provide evidence that small institutional disparities within Continental-European capitalism account for distinct structures of pay.
labour market institutions wage inequality rules collective bargaining