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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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  • Sergi Jiménez-Martín & Jaume Garcia, 2010. "Initial offers and outcomes in wage bargaining: who wins?," Empirical Economics, Springer, vol. 39(3), pages 815-846, December.
    • Handle: RePEc:spr:empeco:v:39:y:2010:i:3:p:815-846
    DOI: 10.1007/s00181-009-0324-4
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    Cited by:

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    2. Jung, Sven, 2014. "Employment adjustment in German firms (Betriebliche Beschäftigungsanpassung in Deutschland)," Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 47(1-2), pages 83-106.
    3. Elisabetta LODIGIANI & Sara SALOMONE, 2020. "Migration-induced transfers of norms: the case of female political empowerment," JODE - Journal of Demographic Economics, Cambridge University Press, vol. 86(4), pages 435-477, December.
    4. Jung, Sven, 2013. "Employment Adjustment in German Firms," VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79696, Verein für Socialpolitik / German Economic Association.
    5. Jung, Sven, 2012. "Employment adjustment in German firms," Discussion Papers 80, Friedrich-Alexander University Erlangen-Nuremberg, Chair of Labour and Regional Economics.
    6. Sven Jung, 2014. "Employment adjustment in German firms [Betriebliche Beschäftigungsanpassung in Deutschland]," Journal for Labour Market Research, Springer;Institute for Employment Research/ Institut für Arbeitsmarkt- und Berufsforschung (IAB), vol. 47(1), pages 83-106, March.

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    More about this item

    Keywords

    Claim; Offer; Wage settlement; Bargaining power; Collective bargaining; Wages; Panel data; Sample selection; J50; D82; C33;
    All these keywords.

    JEL classification:

    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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