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Preferences for Collective Versus Individualised Wage Setting

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  • Tito Boeri
  • Michael C. Burda

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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Bibliographic 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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Cited by:
  1. Brändle, Tobias & Baumann, Florian, 2013. "Union Bargaining and Intra-Industry Productivity Differentials: Theory and Evidence from Germany," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79852, Verein für Socialpolitik / German Economic Association.
  2. Alejandro Donado & Klaus Wälde, 2008. "Trade Unions Go Global!," CESifo Working Paper Series 2368, CESifo Group Munich.
  3. Alejandro DONADO & Klaus WALDE, 2010. "How Bad is Globalization for Labour Standards in the North?," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2010028, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  4. Jimeno, Juan F. & Thomas, Carlos, 2013. "Collective bargaining, firm heterogeneity and unemployment," European Economic Review, Elsevier, vol. 59(C), pages 63-79.
  5. Alejandro Donado & Klaus Wa¨lde, 2012. "How trade unions increase welfare," Economic Journal, Royal Economic Society, vol. 122(563), pages 990-1009, 09.
  6. Boris Hirsch & Christian Merkl & Steffen Müller & Claus Schnabel, 2014. "Centralized vs. Decentralized Wage Formation: The Role of Firms’ Production Technology," Kiel Working Papers 1927, Kiel Institute for the World Economy.
  7. Boeri, Tito, 2012. "Setting the minimum wage," Labour Economics, Elsevier, vol. 19(3), pages 281-290.
  8. Donado, Alejandro & Wälde, Klaus, 2012. "Globalization, trade unions and labour standards in the North," ILO Working Papers 469448, International Labour Organization.
  9. Danziger, Eliav & Danziger, Leif, 2014. "A Pareto-Improving Minimum Wage," IZA Discussion Papers 8123, Institute for the Study of Labor (IZA).
  10. Eliav Danziger & Leif Danziger, 2014. "A Pareto-Improving Minimum Wage," CESifo Working Paper Series 4762, CESifo Group Munich.
  11. Lilia Cavallari, 2010. "Fiscal and monetary interactions when wage-setters are large: is there a role for corporatist policies?," Empirica, Springer, vol. 37(3), pages 291-309, July.

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