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The Effects of Product Market Competition on Collective Bargaining Agreements: The Case of Foreign Competition in Canada

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  • John A. Abowd
  • Thomas Lemieux

Abstract

In this paper we estimate the effect of the financial conditions of firms on negotiated wage settlements and on employment using a sample of Canadian collective bargaining agreements from 1965 to 1983. We find that ordinary least squares estimates of the effect of quasi-rents per worker on wages are positive but very small. However, we find a much larger effect when we instrument quasi-rents with measures of foreign competition shocks. We conclude that standard estimates of rent-sharing based on contract data seriously understate the impact of product market competition on negotiated wage settlements.

Suggested Citation

  • John A. Abowd & Thomas Lemieux, 1993. "The Effects of Product Market Competition on Collective Bargaining Agreements: The Case of Foreign Competition in Canada," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 108(4), pages 983-1014.
    • Handle: RePEc:oup:qjecon:v:108:y:1993:i:4:p:983-1014.
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