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ABSTRACT Wage Setting in the Colombian Manufacturing Industry * We show that wage setting in the Colombian manufacturing industry is not fundamentally driven by labor productivity in contrast to the standard theoretical prediction. On the contrary, internal institutional arrangements -payroll taxation, the minimum wage or the price wedge between manufacturing and consumption prices -together with a higher exposure to international trade -connected to the increasing globalization of the Colombian economyappear as the crucial drivers. These findings lead us to question the political strategy followed to attain cost competitiveness in a context of growing exposure to international trade. Implementation of a true wage bargaining system is suggested as a critical policy target to prevent the disruptive economic consequences of the current wage setting mechanism and help rebalance the trade deficit. JEL Classification: J30, F16, J31

This paper examines changes in the structure of labor demand in panel data on Finnish manu-facturing plants. I exploit general equilibrium effects on unit labor costs in local labor markets induced by the 1990 collapse of Fenno-Soviet trade to identify labor demand schedules for plants producing for the non-Soviet markets, which were not directly affected by the fall of Soviet-import demand. The estimated model implies that the relative demand for non-interpersonal, manual task-intensive production labor activities is stagnant in the 1990s, but starts to decline rapidly in the early 2000s, coinciding with a surge of imported intermediate inputs. In this period, the industry patterns of the shift also begin to diverge. Offshoring and ICT explain both one-third of the overall shift.

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