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Initial offers and outcomes in wage bargaining: who wins?

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  • Sergi Jiménez-Martín

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  • Jaume Garcia

Abstract

The initial works council’s wage claim and the initial firm’s (counter)offer as well as the fraction of the disputed wages the works council is able to capture conditional on initial disagreement are analyzed on the basis of a Spanish sample of wage settlements. After a given initial wage claim, the system forces the firm either to accept it or to make a counteroffer prior to a fixed (unknown to the econometrician) and short deadline. In this context signaling models predict that the wage claim should try to screen the firm’s level of profitability, while the offer is expected to reveal little information. Both hypotheses are tested using the Spanish data set and neither is rejected. The analysis of the fraction of the disputed wages the workers get after initial disagreement provides further evidence in favour of signalling models since we find it is to both observed and private information as well as to conflicting activity variables. Moreover, conditional on covariates, for a number of sectors, we cannot reject the parties “split the difference” between both initial offers. Note this solution coincides with the Rubinstein’s (1982) wage, the solution for the complete information game.
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Suggested Citation

  • Sergi Jiménez-Martín & Jaume Garcia, 2010. "Initial offers and outcomes in wage bargaining: who wins?," Empirical Economics, Springer, vol. 39(3), pages 815-846, December.
  • Handle: RePEc:spr:empeco:v:39:y:2010:i:3:p:815-846
    DOI: 10.1007/s00181-009-0324-4
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    References listed on IDEAS

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    1. Rubinstein, Ariel, 1982. "Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 50(1), pages 97-109, January.
    2. Peter Cramton & Morley Gunderson & Joseph Tracy, 1999. "The Effect Of Collective Bargaining Legislation On Strikes And Wages," The Review of Economics and Statistics, MIT Press, vol. 81(3), pages 475-487, August.
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    5. Peter Cramton & Joseph Tracy, 2003. "Unions, Bargaining and Strikes," Papers of Peter Cramton 02ubs, University of Maryland, Department of Economics - Peter Cramton, revised 05 Sep 2002.
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    Cited by:

    1. Elisabetta Lodigiani & Sara Salomone, 2012. "Migration-induced Transfers of Norms. The Case of Female Political Empowerment," DEGIT Conference Papers c017_058, DEGIT, Dynamics, Economic Growth, and International Trade.
    2. Jung, Sven, 2013. "Employment Adjustment in German Firms," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79696, Verein für Socialpolitik / German Economic Association.
    3. Jung, Sven, 2012. "Employment adjustment in German firms," Discussion Papers 80, Friedrich-Alexander University Erlangen-Nuremberg, Chair of Labour and Regional Economics.

    More about this item

    Keywords

    Claim; Offer; Wage settlement; Bargaining power; Collective bargaining; Wages; Panel data; Sample selection; J50; D82; C33;

    JEL classification:

    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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