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Preferences for Collective versus Individualised Wage Setting

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  • Boeri, Tito

    ()
    (Bocconi University)

  • Burda, Michael C.

    ()
    (Humboldt University Berlin)

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 individualized 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 Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3365.

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Length: 37 pages
Date of creation: Feb 2008
Date of revision:
Handle: RePEc:iza:izadps:dp3365

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Keywords: wage rigidity; employment protection; equilibrium unemployment;

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Cited by:
  1. Alejandro Donado & Klaus Wälde, 2008. "Trade Unions Go Global!," CESifo Working Paper Series 2368, CESifo Group Munich.
  2. Jimeno, Juan F. & Thomas, Carlos, 2013. "Collective bargaining, firm heterogeneity and unemployment," European Economic Review, Elsevier, vol. 59(C), pages 63-79.
  3. Alejando Donado & Klaus Wälde, 2010. "How Bad is Globalization for Labour Standards in the North?," Working Papers 1011, Gutenberg School of Management and Economics, Johannes Gutenberg-Universität Mainz, revised 19 Aug 2010.
  4. Alejandro DONADO & Klaus WALDE, 2010. "How Trade Unions Increase Welfare," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2010027, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  5. Hirsch, Boris & Merkl, Christian & Mueller, Steffen & Schnabel, Claus, 2014. "Centralized vs. decentralized wage formation: The role of firms' production technology," Discussion Papers 92, Friedrich-Alexander-University Erlangen-Nuremberg, Chair of Labour and Regional Economics.
  6. Boeri, Tito, 2009. "Setting the Minimum Wage," IZA Discussion Papers 4335, Institute for the Study of Labor (IZA).
  7. Danziger, Eliav & Danziger, Leif, 2014. "A Pareto-Improving Minimum Wage," IZA Discussion Papers 8123, Institute for the Study of Labor (IZA).
  8. Eliav Danziger & Leif Danziger, 2014. "A Pareto-Improving Minimum Wage," CESifo Working Paper Series 4762, CESifo Group Munich.
  9. Lilia Cavallari, 2010. "Fiscal and monetary interactions when wage-setters are large: is there a role for corporatist policies?," Empirica, Springer, vol. 37(3), pages 291-309, July.
  10. 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 79852, Verein für Socialpolitik / German Economic Association.
  11. Donado, Alejandro & Wälde, Klaus, 2012. "Globalization, trade unions and labour standards in the North," ILO Working Papers 469448, International Labour Organization.

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