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The Effect of Firm-Level Contracts on the Structure of Wages: Evidence from Matched Employer-Employee Data

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Author Info
Card, David () (University of California, Berkeley and IZA Bonn)
de la Rica, Sara (DFAEII, Universidad del País Vasco)

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Abstract

In Spain, as in several other European countries, sectoral bargaining agreements are automatically extended to cover all firms in an industry. Employers and employees can also negotiate firm-specific contracts. We use a large matched employer-employee data set to study the effects of firm-level contracting on the structure of wages. Employees covered by firm-specific contracts earn about 10 percent more than those covered by sectoral contracts. The estimated premium is about the same for men in different skill groups, but higher for more highly skilled women, suggesting that firm-level contracts raise wage inequality for women. At the establishment level, we compare average wages under firm-level and sectoral bargaining, controlling for the propensity to negotiate a firm-specific contract. Consistent with the worker-level models, we find that firm-specific contracting raises average wages, with a pattern of effects that tends to increase inequality relative to sectoral bargaining for women. Although we cannot decisively test between alternative explanations for the firm-level contracting premium, workers with firm-specific contracts have significantly longer job tenure, suggesting that the premium is at least partially a non-competitive phenomenon.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1421.

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Length: 47 pages
Date of creation: Dec 2004
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Handle: RePEc:iza:izadps:dp1421

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Related research
Keywords: bargaining; wage inequality; labor contracts;

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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References listed on IDEAS
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.:
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Cited by:
(explanations, 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. Addison, John T. & Teixeira, Paulino & Zwick, Thomas, 2006. "Works councils and the anatomy of wages," ZEW Discussion Papers 06-86, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
    Other versions:
  2. Catalina Amuedo-Dorantes & Sara de la Rica Goiricelaya, 2005. "The Impact of Gender Segregation on Male-Female Wage Differentials," DFAEII Working Papers 200516, University of the Basque Country - Department of Foundations of Economic Analysis II. [Downloadable!]
  3. Alcala, Francisco & Hernandez, Pedro J., 2005. "Firm characteristics, labor sorting, and wages," MPRA Paper 1226, University Library of Munich, Germany, revised 17 Jan 2007. [Downloadable!]
  4. Mario Izquierdo & Aitor Lacuesta, 2007. "Wage inequality in Spain - recent developments," Working Paper Series 781, European Central Bank. [Downloadable!]
  5. John T. Addison & Paulino Teixeira & Thomas Zwick, 2006. "The Impact of Works Councils on Wages," GEMF Working Papers 2006-08, GEMF - Faculdade de Economia, Universidade de Coimbra. [Downloadable!]
  6. Catalina Amuedo-Dorantes & Sara De la Rica, 2006. "The Role of Segregation and Pay Structure on the Gender Wage Gap: Evidence from Matched Employer-Employee Data for Spain," The B.E. Journal of Economic Analysis & Policy, Berkeley Electronic Press, vol. 0(1). [Downloadable!]
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