Productivity and Wage Effects of Firm‐Level Collective Agreements: Evidence from Belgian Linked Panel Data

How do firm‐level collective agreements affect firm performance in a multi‐level bargaining system? Using detailed Belgian‐linked employer–employee panel data, our findings show that firm‐level agreements increase both wage costs and labour productivity (with respect to sector‐level agreements). Relying on approaches developed by Bartolucci and Hellerstein et al., they also indicate that firm‐level agreements exert a stronger impact on wages than on productivity, so that profitability is hampered. However, this rent‐sharing effect mostly holds in sectors where firms are more concentrated or less exposed to international competition. Firm agreements are thus mainly found to raise wages beyond labour productivity when the rents to be shared between workers and firms are relatively big. Overall, this suggests that firm‐level agreements benefit both employers and employees — through higher productivity and wages — without being very detrimental to firms’ performance.