Productivity-wage nexus at the firm-level in Portugal
Decoupling and divergences
There is a growing international concern about the slowdown in productivity growth,
especially as labor productivity enhancements are important drivers of higher generalised
living standards.
Using administrative data of firms in Portugal between 2010 and 2016, we analyse the
relationships between productivity and wages. At odds with neoclassical theory of
marginal productivity of labor, we find that two thirds of firms insufficiently raised
wages given observed productivity growth. Employing unconditional quantile regressions,
we investigate some quantifiable determinants of the productivity-wage gap at different
parts of the distributions. Most of the documented dynamics contributed not only to
the divergence of productivity and wages but also to the decoupling of productivity
and wage growth. We argue that labor market flexibilisation intensified segmentation,
providing incentives for non standard contracts. Both dimensions, as well as higher
board compensations, international trade and on-the-job training weakened the link
between productivity and wages.
Published on October 18, 2021
In series:OECD Productivity Working Papersview more titles