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Initial Offers and Outcomes in Wage Barganing: Who Wins?

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  • Jaume Garcia,
  • Sergi Jiménez-Martín

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

Paper provided by FEDEA in its series Working Papers with number 2007-22.

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Date of creation: Jun 2007
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Handle: RePEc:fda:fdaddt:2007-22

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  1. Peter Cramton & Morley Gunderson & Joseph Tracy, 1999. "The Effect of Collective Bargaining Legislation on Strikes and Wages," Papers of Peter Cramton 99res, University of Maryland, Department of Economics - Peter Cramton, revised 30 Jul 1998.
  2. R Blundell & Steven Bond, . "Initial conditions and moment restrictions in dynamic panel data model," Economics Papers W14&104., Economics Group, Nuffield College, University of Oxford.
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  7. Ariel Rubinstein, 2010. "Perfect Equilibrium in a Bargaining Model," Levine's Working Paper Archive 661465000000000387, David K. Levine.
  8. Gu, Wulong & Kuhn, Peter, 1998. "A Theory of Holdouts in Wage Bargaining," American Economic Review, American Economic Association, vol. 88(3), pages 428-49, June.
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Cited by:
  1. Jung, Sven, 2012. "Employment adjustment in German firms," Discussion Papers 80, Friedrich-Alexander-University Erlangen-Nuremberg, Chair of Labour and Regional Economics.
  2. Elisabetta Lodigiani & Sara Salomone, 2012. "Migration-induced Transfers of Norms. The Case of Female Political Empowerment," DEGIT Conference Papers c017_058, DEGIT, Dynamics, Economic Growth, and International Trade.

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