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Preferences for Collective Versus Individualised Wage Setting

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Author Info
Tito Boeri
MichaelC. Burda

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Abstract

Standard models of equilibrium unemployment assume exogenous labour market institutions and flexible wage determination. This article models wage rigidity and the coverage of collective bargaining endogenously, when workers differ by observable skill and may adopt either individualised or collective wage bargaining. In the calibrated model, a substantial fraction of workers and firms as well as the median voter prefer collective bargaining to the decentralised regime. A fundamental distortion of the separation decision in the form of a firing tax is necessary for these preferences to emerge. Endogenous coverage of collective bargaining can significantly modify the model's comparative statics predictions. Copyright © The Author(s). Journal compilation © Royal Economic Society 2009.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1468-0297.2009.02286.x
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Publisher Info
Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 119 (2009)
Issue (Month): 540 (October)
Pages: 1440-1463
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Handle: RePEc:ecj:econjl:v:119:y:2009:i:540:p:1440-1463

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  1. Alejandro Donado & Klaus Wälde, 2008. "Trade Unions go global!," Working Papers 2008_22, Department of Economics, University of Glasgow, revised Aug 2008. [Downloadable!]
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