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Initial offers and outcomes in wage bargaining: who wins?

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  • Sergi Jiménez-Martín

    ()

  • Jaume Garcia

Abstract

The initial works council’s wage claim and the initial firm’s (counter)offer as well as the fraction of the disputed wages the works council is able to capture conditional on initial disagreement are analyzed on the basis of a Spanish sample of wage settlements. After a given initial wage claim, the system forces the firm either to accept it or to make a counteroffer prior to a fixed (unknown to the econometrician) and short deadline. In this context signaling models predict that the wage claim should try to screen the firm’s level of profitability, while the offer is expected to reveal little information. Both hypotheses are tested using the Spanish data set and neither is rejected. The analysis of the fraction of the disputed wages the workers get after initial disagreement provides further evidence in favour of signalling models since we find it is to both observed and private information as well as to conflicting activity variables. Moreover, conditional on covariates, for a number of sectors, we cannot reject the parties “split the difference” between both initial offers. Note this solution coincides with the Rubinstein’s (1982) wage, the solution for the complete information game.

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Bibliographic Info

Article provided by Springer in its journal Empirical Economics.

Volume (Year): 39 (2010)
Issue (Month): 3 (December)
Pages: 815-846

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Handle: RePEc:spr:empeco:v:39:y:2010:i:3:p:815-846

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Keywords: Claim; Offer; Wage settlement; Bargaining power; Collective bargaining; Wages; Panel data; Sample selection; J50; D82; C33;

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References

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  1. Cramton, Peter C & Tracy, Joseph S, 1992. "Strikes and Holdouts in Wage Bargaining: Theory and Data," American Economic Review, American Economic Association, vol. 82(1), pages 100-121, March.
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  11. Admati, Anat R & Perry, Motty, 1987. "Strategic Delay in Bargaining," Review of Economic Studies, Wiley Blackwell, vol. 54(3), pages 345-64, July.
  12. Olivier Jean Blanchard & Lawrence Katz, 1999. "Wage Dynamics: Reconciling Theory and Evidence," NBER Working Papers 6924, National Bureau of Economic Research, Inc.
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Cited by:
  1. Elisabetta Lodigiani & Sara Salomone, 2012. "Migration-Induced Transfers of Norms. The Case of Femal Political Empowerment," Development Working Papers 343, Centro Studi Luca d\'Agliano, University of Milano, revised 13 Nov 2012.
  2. Jung, Sven, 2012. "Employment adjustment in German firms," Discussion Papers 80, Friedrich-Alexander-University Erlangen-Nuremberg, Chair of Labour and Regional Economics.

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