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Preferences for Collective versus Individualised Wage Setting

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  • Tito Boeri
  • Michael C. Burda

Abstract

Standard models of equilibrium unemployment assume exogenous labour market institutions and flexible wage determination. This paper models wage rigidity and collective bargaining endogenously, when workers differ by observable skill and may adopt either individualised or collective wage bargaining. In the calibrated model, a substantial fraction of workers and firms as well as the median voter prefer collective bargaining to the decentralised regime. A fundamental distortion of the separation decision represented by employment protection (a firing tax) is necessary for such preferences to emerge. Endogenizing collective bargaining can significantly modify comparative statics effects of policy arising in a single-regime setting.

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Bibliographic Info

Paper provided by Sonderforschungsbereich 649, Humboldt University, Berlin, Germany in its series SFB 649 Discussion Papers with number SFB649DP2008-021.

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Length: 36 pages
Date of creation: Feb 2008
Date of revision:
Handle: RePEc:hum:wpaper:sfb649dp2008-021

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Keywords: Wage rigidity; employment protection; equilibrium unemployment;

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References

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Citations

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Cited by:
  1. Brändle, Tobias & Baumann, Florian, 2013. "Union Bargaining and Intra-Industry Productivity Differentials: Theory and Evidence from Germany," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order, Verein für Socialpolitik / German Economic Association 79852, Verein für Socialpolitik / German Economic Association.
  2. Donado, Alejandro & Wälde, Klaus, 2009. "Trade unions go global!," IAB Discussion Paper, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany] 200903, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  3. Danziger, Eliav & Danziger, Leif, 2014. "A Pareto-Improving Minimum Wage," IZA Discussion Papers 8123, Institute for the Study of Labor (IZA).
  4. Hirsch, Boris & Merkl, Christian & Müller, Steffen & Schnabel, Claus, 2014. "Centralized vs. Decentralized Wage Formation: The Role of Firms' Production Technology," IZA Discussion Papers 8242, Institute for the Study of Labor (IZA).
  5. Alejandro Donado & Klaus Wa¨lde, 2012. "How trade unions increase welfare," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 122(563), pages 990-1009, 09.
  6. Eliav Danziger & Leif Danziger, 2014. "A Pareto-Improving Minimum Wage," CESifo Working Paper Series 4762, CESifo Group Munich.
  7. Boeri, Tito, 2012. "Setting the minimum wage," Labour Economics, Elsevier, Elsevier, vol. 19(3), pages 281-290.
  8. Lilia Cavallari, 2010. "Fiscal and monetary interactions when wage-setters are large: is there a role for corporatist policies?," Empirica, Springer, Springer, vol. 37(3), pages 291-309, July.
  9. Jimeno, Juan F. & Thomas, Carlos, 2013. "Collective bargaining, firm heterogeneity and unemployment," European Economic Review, Elsevier, Elsevier, vol. 59(C), pages 63-79.
  10. Donado, Alejandro & Wälde, Klaus, 2012. "Globalization, trade unions and labour standards in the North," ILO Working Papers, International Labour Organization 469448, International Labour Organization.
  11. Alejandro Donado & Klaus Wälde, 2010. "How Bad is Globalization for Labour Standards in the North?," FIW Working Paper series, FIW 059, FIW.

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