The arguments for and against deregulation and decentralisation of wage determti nation are discussed and the experiences of New Zealand, the United Kingdom and the United States are reviewed. International comparative research, especially by Calmfors and Driffill (1987) and Dowrick (1993) is discussed. It is concluded that it is very bard to determine the effects of deregulation or decentralisation, because of the problem of establishing the counterfactual. Nonetheless, there is theory and evidence to support the idea that more decentralised and deregulated wage determination can promote efficiency, but will often lead to a wideuing distribution of earnings. It is noted that to a large extent such changes to wage determination are probably endogenous, being determined by such factors as technological change and international competition, and are thus perhaps as much an outcome as a cause. It is argued that despite much criticism of tbe Calmfors and Driffill bypothesis, there is still much merit in it. To tbe extent that it can provide a useful guide to policy in Australia, decentralisation of wage determination appears to be a more viable optioil than centralisation. If adopted, changes to the tax/transfer system sbould also be contemplated to belp promote both efficient and equitable outcomes.
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