Do wages reflect labor productivity? The case of Belgian regions

Classic economic theory applied to the labor market assumes that markets are perfectly informed and able to allocate workers in open vacancies in equilibrium. These workers are paid a salary equal to their marginal product of labor, since labor supply and demand are both satisfied. In the real world, however, this condition might not hold, as there exist many market frictions triggered by imperfect information and institutional factors, such as employment protection, unemployment benefits, collective bargaining, minimum wages and taxation. The persistently high unemployment rates plaguing the... Mehr ...