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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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David Card
Sara de la Rica

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Abstract

In many 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 from Spain to study the effects of firm-level contracting on the structure of wages. We estimate a series of wage determination models, including specifications that control for individual characteristics, co-worker characteristics, the bargaining status of the workplace, and the probability the workplace is covered by a firm-level contract. We find that firm-level contracting is associated with a 5-10 percent wage premium, with larger premiums for more highly paid workers. 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 National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11829.

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Date of creation: Dec 2005
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Handle: RePEc:nbr:nberwo:11829

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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
J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General

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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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    Other versions:
  4. Akerlof, George A, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, MIT Press, vol. 97(4), pages 543-69, November. [Downloadable!] (restricted)
  5. Güell, Maia & Petrongolo, Barbara, 2003. "How Binding Are Legal Limits? Transitions from Temporary to Permanent Work in Spain," IZA Discussion Papers 782, Institute for the Study of Labor (IZA). [Downloadable!]
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  17. Sara de la Rica, 2003. "Decomposing the Gender Wage Gap: The effect of firms, occupations and Job Stratificat," DFAEII Working Papers 200210, University of the Basque Country - Department of Foundations of Economic Analysis II. [Downloadable!]
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  20. Dell'Aringa, Carlo & Lucifora, Claudio, 1994. "Collective bargaining and relative earnings in Italy," European Journal of Political Economy, Elsevier, vol. 10(4), pages 727-747, December. [Downloadable!] (restricted)
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Full references

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. Mario Izquierdo & Aitor Lacuesta, 2007. "Wage inequality in Spain - recent developments," Working Paper Series 781, European Central Bank. [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!]
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