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Collective bargaining, firm heterogeneity and unemployment

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  • Jimeno, Juan F.
  • Thomas, Carlos

Abstract

We compare labor market outcomes under firm-level and sector-level bargaining in a one-sector Mortensen-Pissarides economy with firm-specific productivity shocks. Our main theoretical results are two-fold. First, unemployment is lower under firm-level bargaining, due both to a lower job destruction rate and a higher job-finding rate. Key to this result is the interplay between firm heterogeneity and wage compression under sector-level bargaining. Second, introducing efficient opting-out of sector-level agreements suffices to bring unemployment down to its level under decentralized bargaining.

Suggested Citation

  • Jimeno, Juan F. & Thomas, Carlos, 2013. "Collective bargaining, firm heterogeneity and unemployment," European Economic Review, Elsevier, vol. 59(C), pages 63-79.
  • Handle: RePEc:eee:eecrev:v:59:y:2013:i:c:p:63-79
    DOI: 10.1016/j.euroecorev.2012.11.009
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    More about this item

    Keywords

    Collective bargaining; Firm-specific shocks; Wage compression; Unemployment;
    All these keywords.

    JEL classification:

    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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