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Why do capital intensive companies pay higher wages?

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Author Info
Virén , Matti () (University of Turku and Bank of Finland)
Abstract

An 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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File URL: http://www.bof.fi/NR/rdonlyres/8B99A247-4730-4E83-80EB-910C568440B5/0/0505netti.pdf
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Publisher Info
Paper provided by Bank of Finland in its series Research Discussion Papers with number 5/2005.

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Length: 27 pages
Date of creation: 13 Feb 2005
Date of revision:
Handle: RePEc:hhs:bofrdp:2005_005

Contact details of provider:
Postal: Bank of Finland, P.O. Box 160, FI-00101 Helsinki, Finland
Web page: http://www.bof.fi/en/tutkimus
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Related research
Keywords: wages; bargaining; wage distribution; panel data;

Other versions of this item:

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

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Matti Virén, 2005. "Why do capital intensive companies pay higher wages?," Labor and Demography 0508014, EconWPA. [Downloadable!]
  2. Crowley, Patrick, 2005. "An intuitive guide to wavelets for economists," Research Discussion Papers 1/2005, Bank of Finland. [Downloadable!]
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This page was last updated on 2009-12-22.

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