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Unemployment and the coverage extension of collective wage agreements

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  • Murtin, Fabrice
  • de Serres, Alain
  • Hijzen, Alexander

Abstract

This paper examines how the extension of collective wage bargaining agreements to non-unionized firms affects unemployment. Testing a large number of econometric specifications on data from 15 OECD countries observed between 1965 and 2007, we find a positive, significant and robust interaction between the tax wedge and the degree of coverage extension of collective wage bargaining agreements. More specifically, our results suggest that the tax wedge has a larger positive effect on unemployment than any other labour market policy in countries with wide extension of collective wage agreements’ coverage such as France or Spain. Conversely, in countries where coverage extension is close to zero as in Nordic countries, unemployment is essentially insensitive to changes in the tax wedge.

Suggested Citation

  • 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.
  • Handle: RePEc:eee:eecrev:v:71:y:2014:i:c:p:52-66
    DOI: 10.1016/j.euroecorev.2014.06.010
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    Cited by:

    1. Braakmann, Nils & Brandl, Bernd, 2016. "The Efficacy of Hybrid Collective Bargaining Systems: An Analysis of the Impact of Collective Bargaining on Company Performance in Europe," MPRA Paper 70025, University Library of Munich, Germany.
    2. Dierk Herzer, 2016. "Unions and Income Inequality: A Heterogeneous Panel Co-integration and Causality Analysis," LABOUR, CEIS, vol. 30(3), pages 318-346, September.
    3. Katrin Oesingmann, 2016. "Extension of Collective Agreements in Europe," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 14(2), pages 59-64, 07.
    4. Balázs Égert & Peter Gal, 2017. "The quantification of structural reforms in OECD countries: A new framework," OECD Journal: Economic Studies, OECD Publishing, vol. 2016(1), pages 91-108.
    5. Agovino Massimiliano & Garofalo Antonio & Cerciello Massimiliano, 2019. "Do Local Institutions Affect Labour Market Participation? The Italian Case," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 19(2), pages 1-21, April.
    6. Bernardo Fanfani, 2019. "The Employment Effects of Collective Bargaining," Working papers 064, Department of Economics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino.
    7. Hijzen Alexander & Martins Pedro S., 2020. "No extension without representation? Evidence from a natural experiment in collective bargaining," IZA Journal of Labor Economics, Sciendo & Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 9(1), pages 1-31, March.
    8. Andrea Garnero, 2021. "The impact of collective bargaining on employment and wage inequality: Evidence from a new taxonomy of bargaining systems," European Journal of Industrial Relations, , vol. 27(2), pages 185-202, June.
    9. Garnero, Andrea & Hijzen, Alexander & Martin, Sébastien, 2019. "More unequal, but more mobile? Earnings inequality and mobility in OECD countries," Labour Economics, Elsevier, vol. 56(C), pages 26-35.
    10. Balazs Egert, 2022. "Public policy reforms and their impact on productivity, investment and employment: new evidence from OECD and non-OECD countries," Public Sector Economics, Institute of Public Finance, vol. 46(2), pages 179-205.
    11. Pedro S. Martins, 2021. "30,000 Minimum Wages: The Economic Effects of Collective Bargaining Extensions," British Journal of Industrial Relations, London School of Economics, vol. 59(2), pages 335-369, June.
    12. Marwa Sahnoun & Chokri Abdennadher, 2022. "Returns to Investment in Education in the OECD Countries: Does Governance Quality Matter?," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 13(3), pages 1819-1842, September.
    13. Grigoli, Francesco & Koczan, Zsoka & Topalova, Petia, 2020. "Automation and labor force participation in advanced economies: Macro and micro evidence," European Economic Review, Elsevier, vol. 126(C).
    14. Francesco Palma & Yann Thommen, 2020. "Employment Protection Reform in European Labor Markets: The Collective Bargaining Regime Matters," De Economist, Springer, vol. 168(4), pages 541-575, December.
    15. 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.
    16. repec:ces:ifodic:v:14:y:2016:i:2:p:19235742 is not listed on IDEAS
    17. Orsetta Causa & Mikkel Hermansen & Nicolas Ruiz, 2016. "The Distributional Impact of Structural Reforms," OECD Economics Department Working Papers 1342, OECD Publishing.
    18. Agudelo, Sonia A. & Sala, Hector, 2017. "Wage Rigidities in Colombia: Measurement, Causes, and Policy Implications," IZA Discussion Papers 10669, Institute of Labor Economics (IZA).
    19. Cardullo, Gabriele & Conti, Maurizio & Sulis, Giovanni, 2015. "Sunk capital, unions and the hold-up problem: Theory and evidence from cross-country sectoral data," European Economic Review, Elsevier, vol. 76(C), pages 253-274.
    20. Marwa Sahnoun & Chokri Abdennadher, 2018. "The assessment of active labor market policies: evidence from OECD countries," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 35(2), pages 257-283, August.
    21. Brigitte Granville & Jaume Martorell Cruz, 2016. "Squared Segmentation: How the Insider/Outsider divide across Public/Private Employment shapes attitudes towards markets," Working Papers 78, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.
    22. Pedro S. Martins, 2014. "30,000 minimum wages: The economic effects of collective agreement extensions," Working Papers 51, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.
    23. Ernesto Villanueva & Effrosyni Adamopoulou, 2022. "Employment and wage effects of extending collective bargaining agreements," IZA World of Labor, Institute of Labor Economics (IZA), pages 136-136, April.
    24. Katrin Oesingmann, 2016. "Extension of Collective Agreements in Europe," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 14(02), pages 59-64, July.
    25. Ramos, Raul & Sanromá, Esteban & Simón, Hipólito, 2022. "Collective bargaining levels, employment and wage inequality in Spain," Journal of Policy Modeling, Elsevier, vol. 44(2), pages 375-395.

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