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Collective bargaining, firm heterogeneity and unemployment

  • Jimeno, Juan F.
  • Thomas, Carlos

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.

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Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 59 (2013)
Issue (Month): C ()
Pages: 63-79

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Handle: RePEc:eee:eecrev:v:59:y:2013:i:c:p:63-79
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