Testing between alternative wage-employment bargaining models using Belgian aggregate data
In this paper, I discriminate among alternative models of bargaining for wages and employment (right-to-manage, efficient bargaining and general bargaining models) using Belgian aggregate data. I estimate the ECM representation of a dynamic employment equation for each model using Engle-Grangerâ€™s two-step estimation procedure. I use Phillips-Hansenâ€™s FME to obtain long-run parametersâ€™ estimators which are optimal and asymptotically normally distributed. On the basis of non-nested tests, both the right-to-manage and the hypothesis that wage-employment negotiations are efficient are ejected in favour of the general bargaining model where outcomes are inefficient.
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