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What a Difference Trade Makes - Export Activity and the Flexibility of Collective Bargaining Agreements

The prevalence of opening clauses in collective bargaining agreements may indicate a tendency to a higher decentralised wage settlement. Increasing competition on international product markets is assumed to be one reason for wage-setting decentralisation, whereas theoretical explanations focus currently on the change of production structure and the impact of exogenous shocks. Incorporating stylised facts about exporting firms, new trade models suggest a different way of adjustment to increasing competition depending on a firm's nature. While the most productive exporters expand into new markets, small, less productive non-exporters are threatened by import competition. Based on the model from Bernard et al. (2003), we apply the theoretical implications to explain why decentralisation in bargaining may arise. We examine in a second step whether small, less productive, non-exporting firms paying low average wages, possess a higher propensity to use opening clauses than more productive, large exporters with a high wage level. Based on IAB Establishment Data covering the German Manufacturing, our results indicate that firms exporting to EMU countries -- but not exporters in general -- have a lower propensity of using opening clauses than non-exporters. However, inconsistent with theory, slight evidence suggests a rising propensity with increasing firm size and increasing wage level.

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Paper provided by Department of Economics, University of Hohenheim, Germany in its series Diskussionspapiere aus dem Institut für Volkswirtschaftslehre der Universität Hohenheim with number 293/2007.

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Length: 26 pages
Date of creation: Dec 2007
Date of revision:
Handle: RePEc:hoh:hohdip:293
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  1. Mark J. Melitz, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," NBER Working Papers 8881, National Bureau of Economic Research, Inc.
  2. Bernd Fitzenberger & Karsten Kohn & Alexander Lembcke, 2008. "Union density and varieties of coverage: the anatomy of union wage effects in Germany," LSE Research Online Documents on Economics 19622, London School of Economics and Political Science, LSE Library.
  3. Wolf Dieter Heinbach & Stefanie Schroepfer, 2007. "Typisierung der Tarifvertragslandschaft, Eine Clusteranalyse der tarifvertraglichen Oeffnungsklauseln," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 227(3), pages 219-235, June.
  4. Wagner, Joachim, 2007. "Productivity and Size of the Export Market: Evidence for West and East German Plants, 2004," IZA Discussion Papers 2661, Institute for the Study of Labor (IZA).
  5. Andrew B. Bernard & Jonathan Eaton & J. Bradford Jenson & Samuel Kortum, 2000. "Plants and Productivity in International Trade," NBER Working Papers 7688, National Bureau of Economic Research, Inc.
  6. Wolf Heinbach, 2007. "Wages in wage-setting regimes with opening clauses," AStA Wirtschafts- und Sozialstatistisches Archiv, Springer, vol. 1(3), pages 233-245, December.
  7. Kenneth Train, 2003. "Discrete Choice Methods with Simulation," Online economics textbooks, SUNY-Oswego, Department of Economics, number emetr2, September.
  8. Schank, Thorsten & Schnabel, Claus & Wagner, Joachim, 2007. "Do exporters really pay higher wages? First evidence from German linked employer-employee data," Journal of International Economics, Elsevier, vol. 72(1), pages 52-74, May.
  9. Harry C. Katz, 1993. "The decentralization of collective bargaining: A literature review and comparative analysis," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 47(1), pages 3-22, October.
  10. Bernard, A. & Wagner, J., 1996. "Exports and Success in German Manufacturing," Working papers 96-10, Massachusetts Institute of Technology (MIT), Department of Economics.
  11. Tamás Bartus, 2005. "Estimation of marginal effects using margeff," Stata Journal, StataCorp LP, vol. 5(3), pages 309-329, September.
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