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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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    References listed on IDEAS

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    1. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, January.
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    Citations

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    Cited by:

    1. Samuel Bentolila & Juan Dolado & Juan Jimeno, 2012. "Reforming an insider-outsider labor market: the Spanish experience," IZA Journal of European Labor Studies, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 1(1), pages 1-29, December.
    2. Hirsch, Boris & Merkl, Christian & Müller, Steffen & Schnabel, Claus, 2014. "Centralized vs. decentralized wage formation: The role of firms' production technology," Kiel Working Papers 1927, Kiel Institute for the World Economy (IfW).
    3. Martins, Pedro S., 2014. "30,000 Minimum Wages: The Economic Effects of Collective Bargaining Extensions," IZA Discussion Papers 8540, Institute for the Study of Labor (IZA).
    4. John T. Addison, 2016. "Collective bargaining systems and macroeconomic and microeconomic flexibility: the quest for appropriate institutional forms in advanced economies," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 5(1), pages 1-53, December.
    5. Murtin, Fabrice & de Serres, Alain & Hijzen, Alexander, 2014. "Unemployment and the coverage extension of collective wage agreements," European Economic Review, Elsevier, vol. 71(C), pages 52-66.
    6. Brändle, Tobias & Baumann, Florian, 2013. "Union Bargaining and Intra-Industry Productivity Differentials: Theory and Evidence from Germany," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79852, Verein für Socialpolitik / German Economic Association.
    7. Stefano Visintin & Alessandro Gentile, 2013. "Il mercato del lavoro in spagna: criticità e riforme strutturali in un contesto di crisi economica," ECONOMIA E SOCIETÀ REGIONALE, FrancoAngeli Editore, vol. 2013(2), pages 65-85.
    8. Samuel Bentolila & Juan J. Dolado & Juan F. Jimeno, 2012. "The New New Labour Market Reform in Spain: Objectives, Instruments, and Shortcomings," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 10(2), pages 03-07, 08.
    9. repec:eee:labeco:v:48:y:2017:i:c:p:1-22 is not listed on IDEAS

    More about this item

    Keywords

    Collective bargaining; Firm-specific shocks; Wage compression; Unemployment;

    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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