9 - An assessment: competition or corporatism?

Summary

Assessing the facts

We started this book with the claim that corporatism reduces non-competitive wage differentials. It is often asserted that corporatism operates as a blunt reduction for wage inequality. While our evidence indeed shows that overall earnings inequality falls with increasing ranking on the corporatist scale, we stress that by whatever mechanism corporatism reduces wage dispersion, it certainly reduces the wage dispersion that is redundant for allocative efficiency.

We support our claim with four specimens of non-competitive wage differentials: those associated with industry affiliation, with firm size, with tenure and with the bargaining regime. We are most confident of the empirical results on interindustry wage differentials. They are widely researched and proven to be robust over time and nations. We are strongly convinced that these differentials fall with corporatism. The statistical evidence is strong and there is a direct link with the degree of centralization in bargaining and with the explicitly stated goals of wage coordination in corporatist countries. We do not feel any need for much additional research on this relationship.

About the wage effect of firm size we have little doubt either. There is much evidence that larger firms pay higher wages. Firm size is often an included variable in individual wage regressions and the result is a standard finding. But extending the international comparison would be quite welcome. Our own results cover only a subset of the countries in the sample.