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Firm heterogeneity and wages in unionised labour markets: Theory and evidence

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  • Bastos, Paulo
  • Monteiro, Natália P.
  • Straume, Odd Rune

Abstract

In many countries wages are set in two stages, where industry-level collective bargaining is followed by firm-specific arrangements determining actual paid wages as a mark-up on the industry wage floor. What explains the wage set in each of these stages? In this paper we show that both the industry wage floor and the average wage cushion are systematically associated with the degree of firm heterogeneity in the industry: The former (latter) is negatively (positively) associated with the productivity spread. Furthermore, since the response of the wage floor dominates that of the wage cushion, workers in more heterogeneous industries tend to get lower actual paid wages. These conclusions are reached in a model of Cournot oligopoly with firm productivity heterogeneity and a two-tiered wage setting system. They are then confirmed by administrative data covering virtually all workers, firms and collective bargaining agreements of the Portuguese private sector for the period 1991-2000.

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Bibliographic Info

Article provided by Elsevier in its journal Labour Economics.

Volume (Year): 16 (2009)
Issue (Month): 4 (August)
Pages: 440-450

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Handle: RePEc:eee:labeco:v:16:y:2009:i:4:p:440-450

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Web page: http://www.elsevier.com/locate/labeco

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Keywords: Wage determination Trade unions Firm heterogeneity;

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References

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Cited by:
  1. Maritza López-Novella & Salimata Sissoko, 2009. "Working Paper 12-09 - Salaires et négociation collective en Belgique : une analyse microéconomique en panel," Working Papers 0912, Federal Planning Bureau, Belgium.
  2. Jung, Sven & Schnabel, Claus, 2009. "Paying more than necessary? The wage cushion in Germany," Discussion Papers 63, Friedrich-Alexander-University Erlangen-Nuremberg, Chair of Labour and Regional Economics.

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