"Collectively bargained wage contracts - in Germany discussed under the heading ‘Flaechentarifvertraege’ - are often asserted to compress the wage structure, to systematically bias wages and therefore to destroy employment opportunities. Accordingly they are accused of being inefficient compared to bilateral wage negotiations. Traditionally economists favored decentralized wage bargaining because it is closest to the idealized market model. More recent theoretical developments, however, take market imperfections (information asymmetries, market power etc.) as their starting point and show that market imperfections may be reduced by, for example, unions. Models of imperfect markets lead to different and more realistic evaluations of institutions than would be possible on the basis of the perfect market model. This article provides an overview of the theoretical and empirical discussion of the relations between wage bargaining systems, wage inequality, and employment. This contribution shows that more coordinated wage bargaining systems correlate with lower wage inequality but the often claimed correlation between low wage inequality and labor market mal performance cannot be found at the aggregated level. Countries with high wage inequality - like the US - but also countries with low wage inequality - like the Scandinavian countries - achieve high employment rates." (author's abstract, IAB-Doku) ((en))
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