Explaining the OECD wage slowdown - Recession or labour decline?

Wage growth slowed significantly in OECD countries in the 1980s and 1990s. Market explanations trace the wage slowdown to a recession characterized by inflationary shocks, high unemployment, and slow productivity growth. Inst itutional accounts focus on the effects of union density, collective bargai ning centralization, and labour government. Analysis of time series from 18 countries for 1966 to 1992 yields some evidence for both theories between 1966 and 1974. Bayesian methods indicate a structural break in the wage gro wth process, linking the wage slowdown of the 1980s to the declining power of labour movements.