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To Bind or Not to Bind Collectively? Decomposition of Bargained Wage Differences Using Counterfactual Distributions

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Collective bargaining agreements still play an important role in the German wage setting system. Both existing theoretical and empirical studies find that collective bargaining leads to higher wages compared to individually agreed ones. However, the impact of collective bargaining on the wage level may be very different along the wage distribution. As unions aim at compressing the wage distribution, one might expect that for covered workers' wages in the lower part of the distribution workers' individual characteristics may be less important than the coverage by a collective contract. In contrast, the relative importance of workers' individual characteristics may rise in the upper part of the wage distribution, whereas the overall wage difference might decline. Using the newly available German Structure of Earnings Survey (GSES) 1995 and 2001, a cross-sectional linked employer-employee-dataset from German official statistics, this study analyses the difference between collectively and individually agreed wages using a Machado/Mata (2005) decomposition type technique.

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  • Wolf Dieter Heinbach & Markus Spindler, 2007. "To Bind or Not to Bind Collectively? Decomposition of Bargained Wage Differences Using Counterfactual Distributions," Diskussionspapiere aus dem Institut für Volkswirtschaftslehre der Universität Hohenheim 294/2007, Department of Economics, University of Hohenheim, Germany.
  • Handle: RePEc:hoh:hohdip:294
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    File URL: http://www.uni-hohenheim.de/RePEc/hoh/papers/294.pdf
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    Cited by:

    1. John Addison & Paulino Teixeira & Jens Stephani & Lutz Bellmann, 2012. "Can German Unions Still Cut It?," GEMF Working Papers 2012-19, GEMF, Faculty of Economics, University of Coimbra.
    2. Bernd Fitzenberger & Karsten Kohn & Alexander C. Lembcke, 2013. "Union Density and Varieties of Coverage: The Anatomy of Union Wage Effects in Germany," ILR Review, Cornell University, ILR School, vol. 66(1), pages 169-197, January.
    3. John Addison & Paulino Teixeira & Katalin Evers & Lutz Bellmann, 2014. "Indicative and Updated Estimates of the Collective Bargaining Premium in Germany," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 53(1), pages 125-156, January.
    4. Antonczyk, Dirk & Fitzenberger, Bernd & Sommerfeld, Katrin, 2010. "Rising wage inequality, the decline of collective bargaining, and the gender wage gap," Labour Economics, Elsevier, vol. 17(5), pages 835-847, October.
    5. Addison, John T. & Teixeira, Paulino & Stephani, Jens & Bellmann, Lutz, 2014. "Union Decline and the Coverage Wage Gap in Germany," IZA Discussion Papers 8257, Institute for the Study of Labor (IZA).
    6. Gürtzgen, Nicole & Garloff, Alfred, 2008. "Innovationen in den Rahmenbedingungen von Tarifverhandlungen: Endbericht zum Projekt," ZEW Expertises, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research, number 110513.

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    Keywords

    collective bargaining; wage structure; wage decomposition; quantile regression;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General

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