IDEAS home Printed from https://ideas.repec.org/a/bla/brjirl/v55y2017i3p463-499.html
   My bibliography  Save this article

We Want Them All Covered! Collective Bargaining and Firm Heterogeneity: Theory and Evidence from Germany

Author

Listed:
  • Florian Baumann
  • Tobias Brändle

Abstract

This paper establishes a link between the extent of collective bargaining and the degree of productivity dispersion within an industry. In a unionised oligopoly model we show that for only small di erences in productivity levels. a sector-union can design a collective wage contract that covers a wide range of heterogeneous firms. In sectors with higher productivity dispersion, an industry union has an incentive to demand firm-level wage contracts with the most productive firms, so that they can prevent low-productivity firms from leaving collective coverage. However, such firm-level contracts may not prevent firms at the lower end of the productivity distribution from avoiding collective coverage in sectors with high productivity dispersion. We test the predictions of the model using German linked employer-employee data between 1996 and 2010 and find support for our theoretical results.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Florian Baumann & Tobias Brändle, 2017. "We Want Them All Covered! Collective Bargaining and Firm Heterogeneity: Theory and Evidence from Germany," British Journal of Industrial Relations, London School of Economics, vol. 55(3), pages 463-499, September.
    • Handle: RePEc:bla:brjirl:v:55:y:2017:i:3:p:463-499
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1111/bjir.2017.55.issue-3
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Haucap, Justus & Pauly, Uwe & Wey, Christian, 2001. "Collective wage setting when wages are generally binding An antitrust perspective," International Review of Law and Economics, Elsevier, vol. 21(3), pages 287-307, September.
    2. Bastos, Paulo & Monteiro, Natália P. & Straume, Odd Rune, 2009. "Firm heterogeneity and wages in unionised labour markets: Theory and evidence," Labour Economics, Elsevier, vol. 16(4), pages 440-450, August.
    3. Braun, Sebastian, 2011. "Unionisation structures, productivity and firm performance: New insights from a heterogeneous firm model," Labour Economics, Elsevier, vol. 18(1), pages 120-129, January.
    4. John T. Addison & Alex Bryson & Paulino Teixeira & André Pahnke, 2011. "Slip Sliding Away: Further Union Decline In Germany And Britain," Scottish Journal of Political Economy, Scottish Economic Society, vol. 58(4), pages 490-518, September.
    5. Addison, John T. & Teixeira, Paulino & Zwick, Thomas, 2006. "Works Councils and the Anatomy of Wages," IZA Discussion Papers 2474, Institute of Labor Economics (IZA).
    6. David Card & Jörg Heining & Patrick Kline, 2013. "Workplace Heterogeneity and the Rise of West German Wage Inequality," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 128(3), pages 967-1015.
    7. Hirsch, Boris & Merkl, Christian & Müller, Steffen & Schnabel, Claus, 2014. "Centralized vs. Decentralized Wage Formation: The Role of Firms' Production Technology," IZA Discussion Papers 8242, Institute of Labor Economics (IZA).
    8. Capuano, Stella & Hauptmann, Andreas & Schmerer, Hans-Jörg, 2014. "Trade and unions: Can exporters benefit from collective bargaining?," IAB-Discussion Paper 201424, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    9. Eberle, Johanna & Jacobebbinghaus, Peter & Ludsteck, Johannes & Witter, Julia, 2011. "Generation of time-consistent industry codes in the face of classification changes : Simple heuristic based on the Establishment History Panel (BHP)," FDZ Methodenreport 201105_en, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    10. Spector, David, 2004. "Competition and the capital-labor conflict," European Economic Review, Elsevier, vol. 48(1), pages 25-38, February.
    11. Christian Bauer & Jörg Lingens, 2014. "Does Collective Wage Bargaining Restore Efficiency in a Search Model with Large Firms?," Economic Journal, Royal Economic Society, vol. 124(579), pages 1066-1085, September.
    12. Jelle Visser, 2007. "Trade Union Decline and What Next - Is Germany a Special Case?," Industrielle Beziehungen - Zeitschrift fuer Arbeit, Organisation und Management - The German Journal of Industrial Relations, Rainer Hampp Verlag, vol. 14(2), pages 97-117.
    13. Bernd Fitzenberger & Karsten Kohn & Qingwei Wang, 2011. "The erosion of union membership in Germany: determinants, densities, decompositions," Journal of Population Economics, Springer;European Society for Population Economics, vol. 24(1), pages 141-165, January.
    14. Grandner, Thomas, 2001. "Unions in oligopolistic, vertically connected industries," European Economic Review, Elsevier, vol. 45(9), pages 1723-1740, October.
    15. Jacobebbinghaus, Peter & Seth, Stefan, 2010. "Linked Employer-Employee Data from the IAB : LIAB Cross-sectional Model 2 1993-2008 (LIAB QM2 9308)," FDZ Datenreport. Documentation on Labour Market Data 201005_en, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    16. Marc J. Melitz & Giancarlo I. P. Ottaviano, 2021. "Market Size, Trade, and Productivity," World Scientific Book Chapters, in: Firms and Workers in a Globalized World Larger Markets, Tougher Competition, chapter 4, pages 87-108, World Scientific Publishing Co. Pte. Ltd..
    17. repec:iab:iabfme:201105(en is not listed on IDEAS
    18. Stephen Machin, 2000. "Union Decline in Britain," British Journal of Industrial Relations, London School of Economics, vol. 38(4), pages 631-645, December.
    19. Emin Dinlersoz & Jeremy Greenwood, 2012. "The Rise And Fall Of Unions In The U.S," Working Papers 12-12, Center for Economic Studies, U.S. Census Bureau, revised Jun 2013.
    20. Barry T. Hirsch, 2004. "What Do Unions Do for Economic Performance?," Journal of Labor Research, Transaction Publishers, vol. 25(3), pages 415-456, July.
    21. Sven Jung & Claus Schnabel, 2011. "Paying More than Necessary? The Wage Cushion in Germany," LABOUR, CEIS, vol. 25(2), pages 182-197, June.
    22. Davidson, Carl, 1988. "Multiunit Bargaining in Oligopolistic Industries," Journal of Labor Economics, University of Chicago Press, vol. 6(3), pages 397-422, July.
    23. Emmanuel Petrakis & Minas Vlassis, 2004. "Endogenous wage bargaining institutions in oligopolistic sectors," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 24(1), pages 55-73, July.
    24. Ebell, Monique & Haefke, Christian, 2006. "Product Market Regulation and Endogenous Union Formation," IZA Discussion Papers 2222, Institute of Labor Economics (IZA).
    25. John T. Addison & Paulino Teixeira & Thomas Zwick, 2010. "German Works Councils and the Anatomy of Wages," ILR Review, Cornell University, ILR School, vol. 63(2), pages 247-270, January.
    26. Lindbeck, Assar & Snower, Dennis J., 2001. "Centralized bargaining and reorganized work: Are they compatible?," European Economic Review, Elsevier, vol. 45(10), pages 1851-1875, December.
    27. Corneo, Giacomo, 1995. "National wage bargaining in an internationally integrated product market," European Journal of Political Economy, Elsevier, vol. 11(3), pages 503-520, September.
    28. Ellguth, Peter & Kohaut, Susanne, 2014. "Tarifbindung und betriebliche Interessenvertretung: Ergebnisse aus dem IAB-Betriebspanel 2013," WSI-Mitteilungen, Nomos Verlagsgesellschaft mbH & Co. KG, vol. 67(4), pages 286-295.
    29. Mr. Ramana Ramaswamy & Mr. Bob Rowthorn, 1993. "Centralized Bargaining, Efficiency Wages, and Flexibility," IMF Working Papers 1993/025, International Monetary Fund.
    30. Mathieu Taschereau-Dumouchel, 2020. "The Union Threat," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 87(6), pages 2859-2892.
    31. Kuhn, Peter, 1988. "Unions in a General Equilibrium Model of Firm Formation," Journal of Labor Economics, University of Chicago Press, vol. 6(1), pages 62-82, January.
    32. Finn Martensen, 2014. "Opposite Effects of Competition and Rents on Collective Bargaining – Evidence from Germany," Working Paper Series of the Department of Economics, University of Konstanz 2014-15, Department of Economics, University of Konstanz.
    33. John T. Addison & Paulino Teixeira & Alex Bryson & André Pahnke, 2013. "Collective Agreement Status and Survivability: Change and Persistence in the German Model," LABOUR, CEIS, vol. 27(3), pages 288-309, September.
    34. repec:iab:iabfda:201005(en is not listed on IDEAS
    35. Jimeno, Juan F. & Thomas, Carlos, 2013. "Collective bargaining, firm heterogeneity and unemployment," European Economic Review, Elsevier, vol. 59(C), pages 63-79.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Fanfani, Bernardo, 2023. "The employment effects of collective wage bargaining," Journal of Public Economics, Elsevier, vol. 227(C).
    2. de Pinto, Marco & Michaelis, Jochen, 2019. "The labor market effects of trade union heterogeneity," Economic Modelling, Elsevier, vol. 78(C), pages 60-72.
    3. de Pinto, Marco & Lingens, Jörg, 2019. "The impact of unionization costs when firm-selection matters," Labour Economics, Elsevier, vol. 60(C), pages 50-63.
    4. Daniel Baumgarten & Sybille Lehwald, 2019. "Trade Exposure and the Decline in Collective Bargaining: Evidence from Germany," CESifo Working Paper Series 7754, CESifo.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Brändle, Tobias & Baumann, Florian, 2013. "Union Bargaining and Intra-Industry Productivity Differentials: Theory and Evidence from Germany," VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79852, Verein für Socialpolitik / German Economic Association.
    2. Tobias Brändle & Laszlo Goerke, 2018. "The one constant: a causal effect of collective bargaining on employment growth? Evidence from German linked‐employer‐employee data," Scottish Journal of Political Economy, Scottish Economic Society, vol. 65(5), pages 445-478, November.
    3. de Pinto, Marco & Lingens, Jörg, 2019. "The impact of unionization costs when firm-selection matters," Labour Economics, Elsevier, vol. 60(C), pages 50-63.
    4. Uwe Jirjahn, 2013. "Der Beitrag der Arbeitsmarktökonomik zur Erforschung von Gewerkschaften und Tarifvertragsbeziehungen in Deutschland," Research Papers in Economics 2013-03, University of Trier, Department of Economics.
    5. Finn Martensen, 2014. "Opposite Effects of Competition and Rents on Collective Bargaining – Evidence from Germany," Working Paper Series of the Department of Economics, University of Konstanz 2014-15, Department of Economics, University of Konstanz.
    6. Boris Hirsch & Steffen Mueller, 2020. "Firm Wage Premia, Industrial Relations, and Rent Sharing in Germany," ILR Review, Cornell University, ILR School, vol. 73(5), pages 1119-1146, October.
    7. Baumgarten, Daniel & Lehwald, Sybille, 2019. "Trade Exposure and the Decline in Collective Bargaining: Evidence From Germany," Rationality and Competition Discussion Paper Series 165, CRC TRR 190 Rationality and Competition.
    8. Fitzenberger Bernd & Sommerfeld Katrin, 2016. "A Sequential Decomposition of the Drop in Collective Bargaining Coverage," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 236(1), pages 37-69, February.
    9. Uwe Jirjahn, 2015. "Research on Trade Unions and Collective Bargaining in Germany: The Contribution of Labor Economics," Research Papers in Economics 2015-10, University of Trier, Department of Economics.
    10. Susanne Prantl & Alexandra Spitz-Oener, 2013. "Interacting Product and Labor Market Regulation and the Impact of Immigration on Native Wages," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2013_22, Max Planck Institute for Research on Collective Goods.
    11. Schnabel Claus, 2016. "United, Yet Apart? A Note on Persistent Labour Market Differences between Western and Eastern Germany," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 236(2), pages 157-179, March.
    12. John T. Addison, 2016. "Collective bargaining systems and macroeconomic and microeconomic flexibility: the quest for appropriate institutional forms in advanced economies," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 5(1), pages 1-53, December.
    13. Baumgarten, Daniel & Irlacher, Michael & Koch, Michael, 2020. "Offshoring and non-monotonic employment effects across industries in general equilibrium," European Economic Review, Elsevier, vol. 130(C).
    14. Krusell, Per & Rudanko, Leena, 2016. "Unions in a frictional labor market," Journal of Monetary Economics, Elsevier, vol. 80(C), pages 35-50.
    15. Brändle, Tobias & Goerke, Laszlo, 2018. "The One Constant: A Causal Effect of Collective Bargaining on Employment Growth?," IZA Discussion Papers 11518, Institute of Labor Economics (IZA).
    16. Henry S Farber & Daniel Herbst & Ilyana Kuziemko & Suresh Naidu, 2021. "Unions and Inequality over the Twentieth Century: New Evidence from Survey Data," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 136(3), pages 1325-1385.
    17. Cardullo, Gabriele & Conti, Maurizio & Sulis, Giovanni, 2020. "A model of unions, two-tier bargaining and capital investment," Labour Economics, Elsevier, vol. 67(C).
    18. John T. Addison & Alex Bryson & Paulino Teixeira & André Pahnke & Lutz Bellmann, 2013. "The Extent of Collective Bargaining and Workplace Representation: Transitions between States and their Determinants. A Comparative Analysis of Germany and Great Britain," Scottish Journal of Political Economy, Scottish Economic Society, vol. 60(2), pages 182-209, May.
    19. G. Cardullo & M. Conti & G. Sulis, 2018. "Unions, Two-Tier Bargaining and Physical Capital Investment: Theory and Firm-Level Evidence from Italy," Working Paper CRENoS 201812, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    20. Schnabel, Claus & Zagelmeyer, Stefan & Kohaut, Susanne, 2005. "Collective bargaining structure and its determinants : an empirical analysis with British and German establishment data," IAB-Discussion Paper 200516, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].

    More about this item

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:brjirl:v:55:y:2017:i:3:p:463-499. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/lsepsuk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.