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Pay Inequality

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  • Moene, Karl Ove
  • Wallerstein, Michael

Abstract

The authors investigate the effects of wage compression through centralized collective bargaining when growth depends on the continual reallocation of labor from older, less productive plants to new, more productive plants. They first study the compression of wage differentials that derive from decentralized bargaining in heterogeneous plants. The authors then consider wage compression when wage differentials arise from competition among employers over workers of differing quality. They show that wage compression through centralized bargaining can result in higher profits and greater entry of new plants than either decentralized bargaining or a competitive labor market. Copyright 1997 by University of Chicago Press.

Suggested Citation

  • Moene, Karl Ove & Wallerstein, Michael, 1997. "Pay Inequality," Journal of Labor Economics, University of Chicago Press, vol. 15(3), pages 403-430, July.
  • Handle: RePEc:ucp:jlabec:v:15:y:1997:i:3:p:403-30
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    References listed on IDEAS

    as
    1. Rubinstein, Ariel, 1982. "Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 50(1), pages 97-109, January.
    2. Zweimuller, Josef & Barth, Erling, 1994. "Bargaining Structure, Wage Determination, and Wage Dispersion in 6 OECD Countries," Kyklos, Wiley Blackwell, vol. 47(1), pages 81-93.
    3. Robert Gibbons & Lawrence Katz, 1992. "Does Unmeasured Ability Explain Inter-Industry Wage Differentials?," Review of Economic Studies, Oxford University Press, vol. 59(3), pages 515-535.
    4. Michael Kremer, 1993. "The O-Ring Theory of Economic Development," The Quarterly Journal of Economics, Oxford University Press, vol. 108(3), pages 551-575.
    5. Harry C. Katz, 1993. "The Decentralization of Collective Bargaining: A Literature Review and Comparative Analysis," ILR Review, Cornell University, ILR School, vol. 47(1), pages 3-22, October.
    6. Lundberg, Erik, 1985. "The Rise and Fall of the Swedish Model," Journal of Economic Literature, American Economic Association, vol. 23(1), pages 1-36, March.
    7. John Sutton, 1986. "Non-Cooperative Bargaining Theory: An Introduction," Review of Economic Studies, Oxford University Press, vol. 53(5), pages 709-724.
    8. Lars Calmfors, 1993. "Centralisation of Wage Bargaining and Macroeconomic Performance: A Survey," OECD Economics Department Working Papers 131, OECD Publishing.
    9. Erica L. Groshen, 1991. "Sources of Intra-Industry Wage Dispersion: How Much Do Employers Matter?," The Quarterly Journal of Economics, Oxford University Press, vol. 106(3), pages 869-884.
    10. Caballero, Ricardo J & Hammour, Mohamad L, 1994. "The Cleansing Effect of Recessions," American Economic Review, American Economic Association, vol. 84(5), pages 1350-1368, December.
    11. Bean, C R & Layard, P R G & Nickell, S J, 1986. "The Rise in Unemployment: A Multi-country Study," Economica, London School of Economics and Political Science, vol. 53(210(S)), pages 1-22, Supplemen.
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