The Institutional Context of an "Empirical Law": The Wage Curve under Different Regimes of Collective Bargaining
AbstractThe wage curve identified by Blanchflower and Oswald (1994) postulates that the wage level is a decreasing function of the regional unemployment rate. In testing this hypothesis, most empirical studies have not taken into account that differences in the institutional framework may have an impact on the existence (or the slope) of a wage curve. Using a large-scale linked employer-employee data set for western Germany, this paper provides a first test of the relevance of different bargaining regimes and of works councils for the existence of a wage curve. In pooled regressions for the period 1998 to 2006 as well as in worker-level or plant-level fixed-effects estimations we obtain evidence for a wage curve for plants with a collective bargaining agreement at firm level. The point estimates for this group of plants are close to the -0.1 elasticity of wages with respect to unemployment postulated by Blanchflower and Oswald. In this regime, we also find that works councils dampen the adjustment of wages to the regional unemployment situation. In the other regimes of plants that either do not make use of collective contracts or apply sectoral agreements, we do not find a wage curve.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4488.
Length: 24 pages
Date of creation: Oct 2009
Date of revision:
Publication status: published in: British Journal of Industrial Relations, 2013, 51 (1), 59-79
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Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany
Other versions of this item:
- Uwe Blien & Wolfgang Dauth & Thorsten Schank & Claus Schnabel, 2013. "The Institutional Context of an ‘Empirical Law’: The Wage Curve under Different Regimes of Collective Bargaining," British Journal of Industrial Relations, London School of Economics, vol. 51(1), pages 59-79, 03.
- Blien, Uwe & Dauth, Wolfgang & Schank, Thorsten & Schnabel, Claus, 2009. "The institutional context of an empirical law: the wage curve under different regimes of collective bargaining," Discussion Papers 64, Friedrich-Alexander-University Erlangen-Nuremberg, Chair of Labour and Regional Economics.
- Blien, Uwe & Dauth, Wolfgang & Schank, Thorsten & Schnabel, Claus, 2009. "The institutional context of an "empirical law": the wage curve under different regimes of collective bargaining," IWQW Discussion Paper Series 13/2009, Friedrich-Alexander-Universität Erlangen-Nürnberg, Institut für Wirtschaftspolitik und Quantitative Wirtschaftsforschung (IWQW).
- J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-11-07 (All new papers)
- NEP-BEC-2009-11-07 (Business Economics)
- NEP-GEO-2009-11-07 (Economic Geography)
- NEP-LAB-2009-11-07 (Labour Economics)
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