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Productivity and Wage Effects of Firm-Level Collective Agreements: Evidence from Belgian Linked Panel Data

Author

Listed:
  • Garnero, Andrea

    () (OECD)

  • Rycx, Francois

    () (Free University of Brussels)

  • Terraz, Isabelle

    () (Université de Strasbourg)

Abstract

How do firm-level collective agreements affect firm performance in a multi-level bargaining system? Using detailed Belgian linked employer-employee panel data, our findings show that firm agreements increase both wage costs and productivity (with respect to sector-level agreements). Relying on a recent approach developed by Bartolucci (2014), they also indicate that firm agreements exert a stronger impact on wages than on productivity, so that profitability is hampered. However, this rent-sharing effect only holds in manufacturing. In private sector services, the raw wage premium associated to firm agreements is entirely driven by compositional effects. Furthermore, estimates show that firm agreements lead to significantly more rent-sharing among firms operating in less competitive environments. Firm agreements are thus mainly found to raise wages beyond productivity when the rents to be shared between workers and firms are relatively big. Overall, this suggests that firm-level agreements benefit to both employers and employees – through higher productivity and wages – without being very detrimental to firms' performance.

Suggested Citation

  • Garnero, Andrea & Rycx, Francois & Terraz, Isabelle, 2018. "Productivity and Wage Effects of Firm-Level Collective Agreements: Evidence from Belgian Linked Panel Data," IZA Discussion Papers 11568, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp11568
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    More about this item

    Keywords

    collective bargaining; productivity; labour costs; linked panel data;

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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