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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

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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Bibliographic Info

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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Publication status: published as Card, David and Sara de la Rica. “The Effect of Firm-Level Contracts on the Structure of Wages: Evidence from Matched Employer-Employee Data.” Industrial and Labor Relations Review (October 2006).
Handle: RePEc:nbr:nberwo:11829

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  1. Hartog, Joop & Leuven, Edwin & Teulings, Coen, 2002. "Wages and the bargaining regime in a corporatist setting: the Netherlands," European Journal of Political Economy, Elsevier, vol. 18(2), pages 317-331, June.
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  7. Sara De La Rica & Thomas Lemieux, 1993. "Does Public Health Insurance Reduce Labor Market Flexibility or Encourage the Underground Economy? Evidence from Spain and the United States," NBER Working Papers 4402, National Bureau of Economic Research, Inc.
  8. Guell, Maia & Petrongolo, Barbara, 2007. "How binding are legal limits? Transitions from temporary to permanent work in Spain," Labour Economics, Elsevier, vol. 14(2), pages 153-183, April.
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  10. Akerlof, George A, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, MIT Press, vol. 97(4), pages 543-69, November.
  11. De la Rica Goiricelaya, Sara, 2003. "Decomposing the Gender Wage Gap: The effect of firms, occupations and Job Stratification," DFAEII Working Papers 2002-10, University of the Basque Country - Department of Foundations of Economic Analysis II.
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  17. Lars Calmfors, 2001. "Wages and Wage-Bargaining Institutions in the Emu : A Survey of the Issues," CESifo Working Paper Series 520, CESifo Group Munich.
  18. Oi, Walter Y. & Idson, Todd L., 1999. "Firm size and wages," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 33, pages 2165-2214 Elsevier.
  19. 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.
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Cited by:
  1. Amuedo Dorantes, Catalina & De la Rica Goiricelaya, Sara, 2005. "The Impact of Gender Segregation on Male-Female Wage Differentials," DFAEII Working Papers 2005-16, University of the Basque Country - Department of Foundations of Economic Analysis II.
  2. Patrick Lünnemann & Ladislav Wintr, 2009. "Wages are flexible, aren?t they? evidence from monthly micro wage data," BCL working papers 39, Central Bank of Luxembourg.
  3. Alcala, Francisco & Hernandez, Pedro J., 2005. "Firm characteristics, labor sorting, and wages," MPRA Paper 1226, University Library of Munich, Germany, revised 17 Nov 2006.
  4. John T. Addison & Paulino Teixeira & Thomas Zwick, 2006. "The Impact of Works Councils on Wages," GEMF Working Papers 2006-08, GEMF - Faculdade de Economia, Universidade de Coimbra.
  5. Addison, John T. & Teixeira, Paulino & Zwick, Thomas, 2006. "Works Councils and the Anatomy of Wages," IZA Discussion Papers 2474, Institute for the Study of Labor (IZA).
  6. Mario Izquierdo & Aitor Lacuesta, 2006. "Wage inequality in Spain: recent developments," Banco de Espa�a Working Papers 0615, Banco de Espa�a.

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