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Industry-Level Wage Bargaining: A Partial Rehabilitation--The German Experience

  • Fitzenberger, Bernd
  • Franz, Wolfgang

In order to reduce unemployment, it is often recommended that industry-level wage bargaining in Germany should be replaced by a more decentralized system. This paper provides a critical assessment of the current wage bargaining institutions and re-examines the case for a more decentralized system. Based on a theoretical model integrating Insider-Outsider aspects into the comparison, the uniformly superior employment performance of a decentralized wage bargaining system is questioned. We conclude that, rather than solely trying to decentralize wage bargaining, a promising policy option may be to improve the skills of the unemployed by efficient labour market policies and to foster institutional reforms such that wage bargaining takes account of the long-run employment consequences of wage setting. Copyright 1999 by Scottish Economic Society.

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Article provided by Scottish Economic Society in its journal Scottish Journal of Political Economy.

Volume (Year): 46 (1999)
Issue (Month): 4 (September)
Pages: 437-57

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Handle: RePEc:bla:scotjp:v:46:y:1999:i:4:p:437-57
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  1. Wolfgang Scheremet, 1995. "Tarifpolitik in Ostdeutschland: Ausstieg aus dem Lohnverhandlungsmodell der Bundesrepublik Deutschland?," Discussion Papers of DIW Berlin 113, DIW Berlin, German Institute for Economic Research.
  2. Lars Calmfors, 1993. "Centralisation of Wage Bargaining and Macroeconomic Performance: A Survey," OECD Economics Department Working Papers 131, OECD Publishing.
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