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Industrial Relations and the Wage Differentials between Skilled and Unskilled Blue-Collar Workers within Establishments: An Empirical Analysis with Data of Manufacturing Firms

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Author Info
Hübler, Olaf () (Institute of Quantitative Economic Research, University of Hannover and IZA, Bonn)
Meyer, Wolfgang (Institute of Economics, University of Hannover)

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Abstract

Increased wage inequality between skilled and unskilled workers is a stylized fact, which can be observed in many developed countries. Among the explanations advanced for this phenomenon is the increasing globalization, a skill-biased technical progress, restructuring of the firms, and last but not least, a decreasing importance of industrial relations institutions. In the paper, we investigate in a three-step procedure with firms’ data whether the latter determinant is influential. We control for the other relevant explanations and split industrial relations into three components - coverage of collective bargaining, existence of a works council, and union density - within a four-equation model. We find an insignificant influence of the union density. A Works council compresses the wage differentials between skilled and unskilled blue-collar workers while coverage is effective in the opposite direction. The latter two effects nearly offset each other.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 176.

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Length: 30 pages
Date of creation: Jul 2000
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Handle: RePEc:iza:izadps:dp176

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Related research
Keywords: Wage differentials; skilled and unskilled labour; union density; works councils; coverage of collective bargaining;

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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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  1. David Card, 1992. "The Effect of Unions on the Distribution of Wages: Redistribution or Relabelling?," NBER Working Papers 4195, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Fortin, Nicole M & Lemieux, Thomas, 1997. "Institutional Changes and Rising Wage Inequality: Is There a Linkage?," Journal of Economic Perspectives, American Economic Association, vol. 11(2), pages 75-96, Spring. [Downloadable!] (restricted)
  3. Kornelius Kraft, 1994. "Wage differentials between skilled and unskilled workers," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 130(2), pages 329-349, June. [Downloadable!] (restricted)
  4. Leamer, Edward E, 1996. "Wage Inequality from International Competition and Technological Change: Theory and Country Experience," American Economic Review, American Economic Association, vol. 86(2), pages 309-14, May. [Downloadable!] (restricted)
  5. Richard B. Freeman, 1982. "Union wage practices and wage dispersion within establishments," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 36(1), pages 3-21, October.
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  6. Nickell, Stephen & Bell, Brian, 1996. "Changes in the Distribution of Wages and Unemployment in OECD Countries," American Economic Review, American Economic Association, vol. 86(2), pages 302-08, May. [Downloadable!] (restricted)
  7. Claudio Lucifora, . "Wage Inequalities and Low Pay: The Role of Labour Market Institutions," Working Papers 1999.13, Fondazione Eni Enrico Mattei. [Downloadable!]
  8. Blau, Francine D. & Kahn, Lawrence M., 1999. "Institutions and laws in the labor market," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 25, pages 1399-1461 Elsevier. [Downloadable!] (restricted)
  9. Robert J. Flanagan, 1999. "Macroeconomic Performance and Collective Bargaining: An International Perspective," Journal of Economic Literature, American Economic Association, vol. 37(3), pages 1150-1175, September. [Downloadable!] (restricted)
  10. Haskel, Jonathan, 1996. "Small Firms, Contracting-out, Computers and Wage Inequality: Evidence from UK Manufacturing," CEPR Discussion Papers 1490, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  11. Snower, Dennis J., 1999. "Causes of Changing Earnings Inequality," IZA Discussion Papers 29, Institute for the Study of Labor (IZA). [Downloadable!]
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  12. Siebert, Horst, 1997. "Labor Market Rigidities: At the Root of Unemployment in Europe," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 37-54, Summer. [Downloadable!] (restricted)
  13. Richard B. Freeman, 1991. "How Much Has De-Unionisation Contributed to the Rise in Male Earnings Inequality?," NBER Working Papers 3826, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  14. Freeman, Richard & Schettkat, Ronald, 2001. "Skill Compression, Wage Differentials, and Employment: Germany vs the US," Oxford Economic Papers, Oxford University Press, vol. 53(3), pages 582-603, July.
    Other versions:
  15. Fitzenberger, Bernd & Franz, Wolfgang, 1999. "Industry-level wage bargaining : a partial rehabilitation ; the German experience," ZEW Discussion Papers 99-33, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  16. Heywood, John S & Hubler, Olaf & Jirjahn, Uwe, 1998. "Variable Payment Schemes and Industrial Relations: Evidence from Germany," Kyklos, Blackwell Publishing, vol. 51(2), pages 237-57.
  17. David Card, 1996. "Deregulation and Labor Earnings in the Airline Industry," NBER Working Papers 5687, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  18. Richard B. Freeman & Edward P. Lazear, 1994. "An Economic Analysis of Works Councils," NBER Working Papers 4918, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
    • Richard B. Freeman & Edward P. Lazear, 1995. "An Economic Analysis of Works Councils," NBER Chapters, in: Works Councils: Consultation, Representation, and Cooperation in Industrial Relations, pages 27-52 National Bureau of Economic Research, Inc. [Downloadable!]
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