Why do capital intensive companies pay higher wages?
AbstractAn obvious answer to this question is the capital-skill complementarity hypothesis originally proposed by Zwi Griliches (1969). But the relatively poor performance of this hypothesis suggests that other explanations are needed. Here we consider the labour union behaviour in the wage bargaining process as such an alternative. The explanation is based on the observation that capital intensive companies are more vulnerable to strike threats and may thus more easily give in for union wage demand. Thus, the bargaining power of unions is related to the capital-labour ratio. This paper provides some tests for these hypotheses with panel data for Finnish companies. The results give support to the wage bargaining hypothesis.
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Bibliographic InfoPaper provided by Bank of Finland in its series Research Discussion Papers with number 5/2005.
Length: 27 pages
Date of creation: 13 Feb 2005
Date of revision:
wages; bargaining; wage distribution; panel data;
Find related papers by JEL classification:
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
- J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-10-21 (All new papers)
- NEP-BEC-2006-10-21 (Business Economics)
- NEP-LAB-2006-10-21 (Labour Economics)
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