Bargaining, Compensating Wage Differentials, and Dualism of the Labor Market: Theory and Evidence for France
The theory of compensating differentials predicts a negative relationship between wages and good working conditions, while the theory of segmentation predicts a positive one. Combining the hedonic wage model and the wages-employment collective bargaining model, the authors show the relevance of a further factor: a union power effect. Then they test the validity of this effect with French cross-section data. Empirical results confirm the predictions of the model, that is, the coexistence of a negative relationship between wages and good working conditions for the whole sample (market effect) and a positive relationship in highly unionized sectors (union power effect). Copyright 1998 by University of Chicago Press.
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