The wage effect of an indexation clause: Evidence from Spanish manufacturing firms
AbstractAn endogenous switching model of ex-ante wage changes under indexed and non-indexed settlements is estimated for the Spanish manufacturing sector using collective bargaining firm data for the 1984-1991 period. The likelihood of indexing the settlement is higher for nationwide unions than for other union groups within the works council and increases with the expected level of inflation. For wage change equations, a common structure for indexed and non-indexed settlements is strongly rejected, showing a source of nominal rigidity. For indexed contracts, the expected ex-ante total inflation coverage is nearly complete. It is also shown that workers pay a significant ex-ante wage change premium (differential) to obtain a cost of living allowance clause. However, the realised contingent compensation exceeds such a premium for all industries. Finally, important spillover effects in wage setting and the decision to index the settlement have been detected.
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Bibliographic InfoPaper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 92.
Date of creation: Aug 1993
Date of revision: Sep 1994
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Web page: http://www.econ.upf.edu/
Indexation; wages; wage differential; spillover effects; unions; collective bargaining; switching;
Find related papers by JEL classification:
- J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
- J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
- C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
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