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Why do some countries run persistent current account surpluses? Why do others run deficits, often over decades, leading to enduring global imbalances? Such persistent imbalances are the root cause of many financial crises and a major source of international economic conflict. We propose that differences in wage-bargaining institutions explain a large share of imbalances through their effect on the trade balance. In countries with coordinated wage bargaining, wage growth in export industries can be restrained to ensure competitiveness, leading to persistent trade surpluses. We estimate the contribution of these institutions to trade balances in Organisation for Economic Co-operation and Development (OECD) member countries since 1977 and find ample support for our hypothesis. Contrary to much of the literature, the choice of fixed or floating exchange rate regimes has only a small effect on trade or current account balances. In other words, internal adjustment in surplus countries via wage-bargaining institutions trumps external adjustment by deficit countries.

This paper investigates the costs for firms of employing women full-time versus part-time, in terms of differential hourly wages. To this end, we use administrative matched employer-employee data on the universe of female workers in Italy over a period of 33 years and rely on regression models that control for worker, firm, and job match fixed effects, in addition to several worker-, job-, and firm-level time-varying factors. We find that, when a worker switches from a full-time to a part-time contract within the same firm, she benefits from an increase in the hourly wage. Over the last three decades, these wage premiums have significantly reduced, although they remained positive and significant up to 2015. We also find that the part-time premium is pervasive and stable across many different labor market segments and independent of the workers’ intrinsic productivity levels. These and other findings appear to be compatible with developments in wage bargaining institutions, whereby more generous conditions can be granted to part-time workers. Coupled with the detrimental effect of part-time work on firm productivity documented by Devicienti et al. (2018), our results contribute to explaining why firms are often unwilling to concede part-time positions to those employees who request such arrangements.

Survey results in 15 European countries for almost 15,000 firms reveal that Belgian firms react more than the average European firm to adverse shocks by reducing permanent and temporary employment. On the basis of a firm-level analysis, this paper confirms that the different reaction to shocks is significant and investigates what factors explain this difference. Although the explanatory value of the variables is limited, most of the explanatory power of the model being associated with the dummy variables coding for firm size, sector and country, the variables investigated provide valuable information. The importance of wage bargaining above the firm level, the automatic system of index-linking wages to past inflation, the limited use of flexible pay, the high share of low-skilled blue-collar workers, the labor intensive production process as well as the less stringent legislation with respect to the protection against dismissal are at the basis of the stronger employment reaction of Belgian firms. On the contrary, employment is safeguarded by the presence of many small firms and a wage cushion.