In a multisector economy with unionized labor markets, the interdependence of union wage claims typical of industrial bargaining affects the relationship between tax progressivity and wage pressure, which varies in a nonlinear fashion with the nature of the wage bargain, and can be hump-shaped....

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...