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Efficient Bargaining and the Skill-Structure of Wages and Employment

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  • Ulrich Kaiser

    ()
    (Center for European Economic Research)

  • Winfried Pohlmeier

    ()
    (Center of Finance and Econometrics)

Abstract

This paper presents structural estimates for a bargaining model which nests the right-to-manage, the efficient wage bargaining, the seniority and the standard neo- classical labor demand model as special cases. In contrast to most existing models, our approach accounts for heterogeneous skill groups which differ in terms of productivity and representation in the bargaining process through union preferences. The paper in- troduces the concept of `virtual' firms which allows us to (i) test the eÆcient contract model against models implying that firms operate on the labor demand curve and to (i) overcome a potential misspecification of firms' output markets. Estimates of structural parameters are obtained from a novel cross{section of German firms of the business related service sector which includes information on skill-specific wage rates at the firm level. Central results of this paper are that unions do care about both wages and employment in the bargaining process and that firms operate on the contract curve. The bargaining power of unions in East Germany turns out to be much weaker than in West Germany.

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Bibliographic Info

Paper provided by Center of Finance and Econometrics, University of Konstanz in its series CoFE Discussion Paper with number 00-24.

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Length: 22 Pages
Date of creation: Aug 2000
Date of revision:
Handle: RePEc:knz:cofedp:0024

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  1. 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.
  2. MaCurdy, Thomas E & Pencavel, John H, 1986. "Testing between Competing Models of Wage and Employment Determination in Unionized Markets," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages S3-S39, June.
  3. Bean, Charles R & Turnbull, Peter J, 1988. "Employment in the British Coal Industry: A Test of the Labour Demand Model," Economic Journal, Royal Economic Society, vol. 98(393), pages 1092-1104, December.
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Cited by:
  1. Ziesemer,Thomas, 2001. "ICT as Technical Change in the Matching and Production Functions of a Pissarides-Dixit-Stiglitz model," Research Memorandum 024, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).

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