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We Want them all Covered! Collective Bargaining and Firm Heterogeneity. Theory and Evidence from Germany

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This paper establishes a link between the extent of collective bargaining and the degree of productivity dispersion within an industry. In a unionised oligopoly model we show that for only small di erences in productivity levels. a sector-union can design a collective wage contract that covers a wide range of heterogeneous firms. In sectors with higher productivity dispersion, an industry union has an incentive to demand firm-level wage contracts with the most productive firms, so that they can prevent low-productivity firms from leaving collective coverage. However, such firm-level contracts may not prevent firms at the lower end of the productivity distribution from avoiding collective coverage in sectors with high productivity dispersion. We test the predictions of the model using German linked employer-employee data between 1996 and 2010 and find support for our theoretical results.

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File URL: http://www.iaw.edu/RePEc/iaw/pdf/iaw_dp_114.pdf
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Paper provided by Institut für Angewandte Wirtschaftsforschung (IAW) in its series IAW Discussion Papers with number 114.

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Length: 44 pages
Date of creation: Jan 2015
Handle: RePEc:iaw:iawdip:114
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  1. John T. Addison & Alex Bryson & Paulino Teixeira & André Pahnke, 2011. "Slip Sliding Away: Further Union Decline In Germany And Britain," Scottish Journal of Political Economy, Scottish Economic Society, vol. 58(4), pages 490-518, 09.
  2. Braun, Sebastian, 2011. "Unionisation structures, productivity and firm performance: New insights from a heterogeneous firm model," Labour Economics, Elsevier, vol. 18(1), pages 120-129, January.
  3. Bastos, Paulo & Monteiro, Natália P. & Straume, Odd Rune, 2009. "Firm heterogeneity and wages in unionised labour markets: Theory and evidence," Labour Economics, Elsevier, vol. 16(4), pages 440-450, August.
  4. David Card & Jörg Heining & Patrick Kline, 2013. "Workplace Heterogeneity and the Rise of West German Wage Inequality," The Quarterly Journal of Economics, Oxford University Press, vol. 128(3), pages 967-1015.
  5. Hirsch, Boris & Merkl, Christian & Müller, Steffen & Schnabel, Claus, 2014. "Centralized vs. Decentralized Wage Formation: The Role of Firms' Production Technology," IZA Discussion Papers 8242, Institute for the Study of Labor (IZA).
  6. Capuano, Stella & Hauptmann, Andreas & Schmerer, Hans-Jörg, 2014. "Trade and unions: Can exporters benefit from collective bargaining?," IAB Discussion Paper 201424, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  7. Bernd Fitzenberger & Karsten Kohn & Qingwei Wang, 2011. "The erosion of union membership in Germany: determinants, densities, decompositions," Journal of Population Economics, Springer;European Society for Population Economics, vol. 24(1), pages 141-165, January.
  8. Emin M. Dinlersoz & Jeremy Greenwood, 2012. "The Rise and Fall of Unions in the U.S," NBER Working Papers 18079, National Bureau of Economic Research, Inc.
  9. Ebell, Monique & Haefke, Christian, 2006. "Product Market Regulation and Endogenous Union Formation," IZA Discussion Papers 2222, Institute for the Study of Labor (IZA).
  10. Mathieu Taschereau-Dumouchel, 2011. "The Union Threat," 2011 Meeting Papers 434, Society for Economic Dynamics.
  11. John T. Addison & Paulino Teixeira & Alex Bryson & André Pahnke, 2013. "Collective Agreement Status and Survivability: Change and Persistence in the German Model," LABOUR, CEIS, vol. 27(3), pages 288-309, 09.
  12. Haucap, Justus & Pauly, Uwe & Wey, Christian, 2001. "Collective wage setting when wages are generally binding An antitrust perspective," International Review of Law and Economics, Elsevier, vol. 21(3), pages 287-307, September.
  13. Spector, David, 2004. "Competition and the capital-labor conflict," European Economic Review, Elsevier, vol. 48(1), pages 25-38, February.
  14. Christian Bauer & Jörg Lingens, 2014. "Does Collective Wage Bargaining Restore Efficiency in a Search Model with Large Firms?," Economic Journal, Royal Economic Society, vol. 124(579), pages 1066-1085, 09.
  15. Jelle Visser, 2007. "Trade Union Decline and What Next - Is Germany a Special Case?," Industrielle Beziehungen - Zeitschrift fuer Arbeit, Organisation und Management - The German Journal of Industrial Relations, Rainer Hampp Verlag, vol. 14(2), pages 97-117.
  16. Lindbeck, Assar & Snower, Dennis J., 2001. "Centralized bargaining and reorganized work: Are they compatible?," European Economic Review, Elsevier, vol. 45(10), pages 1851-1875, December.
  17. Corneo, Giacomo, 1995. "National wage bargaining in an internationally integrated product market," European Journal of Political Economy, Elsevier, vol. 11(3), pages 503-520, September.
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