Abstract
Taking the standard macroeconomic assumption of a one-to-one relationship between wages and productivity as given, empirical studies have extensively focused on the wage and employment effects of “unfriendly” labour market institutions. Here, by contrast, the authors examine the long-term wage effects of productivity growth, deunionization and international trade – from 1980 to 2010, in Finland, France, Italy, Japan, Spain, Sweden, the United Kingdom and the United States. After controlling for productivity, they document an underlying downward trend in wages associated with declining union density and growing exposure to international trade. Their analysis also provides useful insights into the attendant erosion of the labour income share.