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International differences in wage and nonwage labor costs

Author

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  • Riveros, Luis A.

Abstract

The ratio of nonwage labor costs (for social security, pensions, vacation days, severence compensation, and the like) to direct wage costs is proportionately higher in Europe and Latin America than in Asia and Africa - largely because workers there are protected more by regulations. The distortionary growth of labor costs because of increasing nonwage costs is not common in the LDCs however. The author of this paper found that international differences in labor costs are attributable largely to differences in labor productivity and capital-labor ratios. The author also found that labor costs declined significantly in almost all LDCs in the 1980s, and that the impact of declining labor costs on manufacturing employment was statistically significant - and bodes well for the growth of nontraditional exports. International differences in labor cost levels are important, especially when one compares LDC and industrial economies. But differences between labor cost levels in terms of per capita output are not so large. This suggests the importance of different capital-labor ratios.

Suggested Citation

  • Riveros, Luis A., 1989. "International differences in wage and nonwage labor costs," Policy Research Working Paper Series 188, The World Bank.
    • Handle: RePEc:wbk:wbrwps:188
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    References listed on IDEAS

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    1. Marc Nerlove, 1967. "Recent Empirical Studies of the CES and Related Production Functions," NBER Chapters, in: The Theory and Empirical Analysis of Production, pages 55-136, National Bureau of Economic Research, Inc.
    2. Fischer, Bernhard & Spinanger, Dean, 1986. "Factor market distortions and export performance: An eclectic review of the evidence," Kiel Working Papers 259, Kiel Institute for the World Economy (IfW Kiel).
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    4. Robert E. Lipsey & Irving Kravis, 1982. "Do Multinational Firms Adapt Factor Proportions to Relative Factor Prices?," NBER Chapters, in: Trade and Employment in Developing Countries, Volume 2: Factor Supply and Substitution, pages 215-256, National Bureau of Economic Research, Inc.
    5. Papola, T S & Bharadwaj, V P, 1970. "Dynamics of Industrial Wage Structure: An Inter-country Analysis," Economic Journal, Royal Economic Society, vol. 80(317), pages 72-90, March.
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    Cited by:

    1. Agarwal, Jamuna Prasad & Gubitz, Andrea & Nunnenkamp, Peter, 1991. "Foreign direct investment in developing countries: the case of Germany," Open Access Publications from Kiel Institute for the World Economy 423, Kiel Institute for the World Economy (IfW Kiel).
    2. Lopez, Ramon & Riveros, Luis, 1990. "Do labor market distortions cause overvaluation and rigidity of the real exchange rate?," Policy Research Working Paper Series 485, The World Bank.
    3. Nunnenkamp, Peter & Funke, Norbert & Schweickert, Rainer, 1992. "International capital flows: recent developments, major determinants, and the position of Brazil in worldwide competition for foreign capital," Kiel Working Papers 509, Kiel Institute for the World Economy (IfW Kiel).

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