Wage setting in the Colombian manufacturing industry

Agudelo, Sonia A.; Sala, Héctor

doi:10.1111/ecot.12085

Cited by 6 publications

(7 citation statements)

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“…In a monopsonistic market, labor unions bargaining for higher wages can create a horizontal labor supply curve and, as a result, capture rents from employers. Although the Colombian labor legislation recognizes unions as a part of the labor relations system, its role in wage-setting matters is nowadays minimal and essentially restricted to collective bargaining at the firm-level (Agudelo and Sala, 2015). Moreover, union density in Colombia is around 4% and the coverage of collective bargaining agreements is less than 2%.…”

Section: Labor Supply Elasticity Low-skilled Workers and The Minimumentioning

confidence: 99%

Measuring Imperfect Competition in Product and Labor Markets. An Empirical Analysis Using Firm-Level Production Data

Tortarolo

Zarate

2018

SSRN Journal

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In this paper, we develop a simple theoretical model that allows us to disentangle empirically the extent of imperfect competition in product and labor markets using plant-level production data. The model assumes profit-maximizing producers that face upward-sloping labor supply and downward-sloping product demand curves. We derive a reduced-form formula for the ratio between markdowns and markups based on DeLoecker and Warzynski (2012). We use production function estimation techniques to estimate output elasticities and construct a measure of combined market power. We separate product and labor market power by estimating firm-level labor supply elasticities instrumenting wages with intermediate inputs. Our results suggest that both markets exhibit imperfect competition, but variation across industries is driven by the ease of firms to set prices above marginal costs. On average, manufacturing plants charge prices 78% higher than marginal costs, and pay wages 11% less than marginal revenue productivity of labor. We find a negative correlation between product and labor market power and more elastic labor supply curves for unskilled workers. Moreover, we obtain a positive correlation between firms' product market power and productivity, size and exporter status, and a negative correlation of these measures with labor market power. In the last part, we estimate the relative gains of eliminating market power dispersion on allocative efficiency using the model by Hsieh and Klenow (2009). We find that market power dispersion in product markets is more important on TFP than labor markets, and that the negative correlation between the two measures of market power corrects in 7% the economic distortion derived from market power dispersion. Small sections of text, that are less than two paragraphs, may be quoted without explicit permission as long as this document is stated. Findings, interpretations and conclusions expressed in this publication are the sole responsibility of its author(s), and it cannot be, in any way, attributed to CAF, its Executive Directors or the countries they represent. CAF does not guarantee the accuracy of the data included in this publication and is not, in any way, responsible for any consequences resulting from its use. Small sections of text, that are less than two paragraphs, may be quoted without explicit permission as long as this document is stated. Findings, interpretations and conclusions expressed in this publication are the sole responsibility of its author(s), and it cannot be, in any way, attributed to CAF, its Executive Directors or the countries they represent. CAF does not guarantee the accuracy of the data included in this publication and is not, in any way, responsible for any consequences resulting from its use.

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Section: Labor Supply Elasticity Low-skilled Workers and The Minimumentioning

confidence: 99%

Measuring Imperfect Competition in Product and Labor Markets. An Empirical Analysis Using Firm-Level Production Data

Tortarolo

Zarate

2018

SSRN Journal

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“…It is standard in the literature to find that the larger the inflation rate, the lower the DRWR is, on the grounds that quicker progress in prices tend to make labor cost adjustments less binding for firms. In contrast, the positive influence of inflation on DRWR in Colombia is the outcome of a very particular system of wage setting (examined, for example, in Agudelo and Sala, 2016;and Iregui et al, 2005). This critical result is discussed at length in the next section.…”

Section: Resultsmentioning

confidence: 99%

“…The specificities of the wage setting system in Colombia (see Agudelo and Sala, 2016, and the discussion of our results below) lead us to consider two alternative specifications where price inflation is substituted, respectively, by the real minimum wage growth (∆ min ) and growth in ratio between producer and consumer prices (∆):…”

Section: Empirical Implementationmentioning

confidence: 99%

“…Being still at a 50% share over total employment, we should expect policy measures aiming at the continuation of this downward path. Third, the fact is that there is a very low trade union density rate (and a very weak system of collective bargaining) not even relevant to explain the wage behavior (Agudelo and Sala, 2016).…”

Section: Conclusion and Policy Implicationsmentioning

confidence: 99%

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Wage rigidities in Colombia: Measurement, causes, and policy implications

Agudelo

Sala

2017

Journal of Policy Modeling

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Any opinions expressed in this paper are those of the author(s) and not those of IZA. Research published in this series may include views on policy, but IZA takes no institutional policy positions. The IZA research network is committed to the IZA Guiding Principles of Research Integrity. The IZA Institute of Labor Economics is an independent economic research institute that conducts research in labor economics and offers evidence-based policy advice on labor market issues. Supported by the Deutsche Post Foundation, IZA runs the world's largest network of economists, whose research aims to provide answers to the global labor market challenges of our time. Our key objective is to build bridges between academic research, policymakers and society. IZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author. the determinants of such rigidities show no connection to the wage bargaining system. Terms of use: Documents inAmid the absence of effective labor market institutions to make rigidities less prevalent, economic growth appears as the most powerful mechanism to ward them off. Under this light, we provide a stylized description of the wage setting rule in Colombia, compare it with the common one in the advanced economies, and call for a far-reaching reform of the Colombian wage bargaining setup. JEL Classification:E24, J3, J48, J58

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“…A low minimum wage leads to an increase in low-paid jobs. Despite the common agreement on productivity as the main factor influencing wages, the minimum wage together with other external factors may act as the main driver of wage increases [Agudelo, Sala, 2016].…”

Section: Institutional Frameworkmentioning

confidence: 99%

Wage adjustment practices in Russian firms

Rozhkova

Roshchin

Solntsev

2020

RMJ

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Wage adjustments for employees are a reactive mechanism to changing market conditions and form a significant part of pay policy. Though various attempts to explore wage levels and wage differentials have been made, wage adjustment policies remain an understudied topic. This paper analyses the determinants of wage adjustments based on data from Russian companies between 2015 and 2017. The analysis is based on detailed data from an employer survey covering more than 5 000 firms in both the public and private sectors. The study adopts probit models to identify the reasons for wage revisions, which depend on both internal employer characteristics and external labour market conditions. The results are in line with previous research on the topic and suggest that both internal and external factors influence wage adjustments. A wage adjustment is a reflection of an ability to pay, meaning that revisions are often made by successful firms with high employee turnover. It was also found that institutional frameworks, especially trade union activity, also affect a firm's decision to adjust wages, despite the widely-held belief that unions play an insignificant role in Russia. This study contributes to the limited literature by analyzing the determinants of wage policies depending on a firm's characteristics and is the first study of its kind based on extensive Russian data.

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Wage setting in the Colombian manufacturing industry

Cited by 6 publications

References 48 publications

Measuring Imperfect Competition in Product and Labor Markets. An Empirical Analysis Using Firm-Level Production Data

Measuring Imperfect Competition in Product and Labor Markets. An Empirical Analysis Using Firm-Level Production Data

Wage rigidities in Colombia: Measurement, causes, and policy implications

Wage adjustment practices in Russian firms

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