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The Regional Dimension of Collective Wage Bargaining: The Case of Belgium

Author

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  • Plasman, Robert

    () (Free University of Brussels)

  • Rusinek, Michael

    () (ECARES, Free University of Brussels)

  • Tojerow, Ilan

    () (Free University of Brussels)

Abstract

The potential failure of national industry agreements to take into account productivity levels of least productive regions has been considered as one of the causes of regional unemployment in European countries. Two solutions are generally proposed: the first, encouraged by the European commission and the OECD, consists in decentralising wage bargaining to the firm. The second solution, the regionalisation of wage bargaining, is frequently mentioned in Belgium or in Italy where regional unemployment differentials are high. The objective of this paper is to verify if the Belgian wage setting system, where industry bargaining has a national scope, indeed prevents regional productivity levels to be taken into account in wage formation. Using a very rich linked employer-employee dataset which provides detailed information on wages, productivity, and worker's and firm's characteristics, we find that regional wage differentials and regional productivity differentials within joint committees are positively correlated. Moreover, this relation is stronger (i) for joint committees where firm-level bargaining is relatively frequent and (ii) for joint committees already sub-divided along a local line. We conclude that the current Belgian wage setting system (which combines interprofessional, industry and firm level bargaining) already includes mechanisms that allow regional productivity to be taken into account.

Suggested Citation

  • Plasman, Robert & Rusinek, Michael & Tojerow, Ilan, 2008. "The Regional Dimension of Collective Wage Bargaining: The Case of Belgium," IZA Discussion Papers 3864, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp3864
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    References listed on IDEAS

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    1. Uwe Blien & Wolfgang Dauth & Thorsten Schank & Claus Schnabel, 2013. "The Institutional Context of an ‘Empirical Law’: The Wage Curve under Different Regimes of Collective Bargaining," British Journal of Industrial Relations, London School of Economics, vol. 51(1), pages 59-79, March.
    2. Lucio R. Pench & Paolo Sestito & Elisabetta Frontini, 1999. "Some unpleasant arithmetics of regional unemployment in the EU. Are there any lessons for EMU?," European Economy - Economic Papers 2008 - 2015 134, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    3. Romano Piras, 2012. "Internal Migration Across Italian Regions: Macroeconomic Determinants And Accommodating Potential For A Dualistic Economy," Manchester School, University of Manchester, vol. 80(4), pages 499-524, July.
    4. S. Davies & M. Hallet, 2001. "Policy responses to regional unemployment:Lessons from Germany, Spain and Italy," European Economy - Economic Papers 2008 - 2015 161, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
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    Cited by:

    1. Jozef Konings & Luca Marcolin, 2014. "Do wages reflect labor productivity? The case of Belgian regions," IZA Journal of European Labor Studies, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 3(1), pages 1-21, December.
    2. Rycx, Francois & Saks, Yves & Tojerow, Ilan, 2016. "Misalignment of Productivity and Wages across Regions? Evidence from Belgian Matched Panel Data," IZA Discussion Papers 10336, Institute for the Study of Labor (IZA).
    3. Koster, Hans R. A., 2013. "Rocketing rents the magnitude and attenuation of agglomeration economies in the commercial property market," LSE Research Online Documents on Economics 58531, London School of Economics and Political Science, LSE Library.
    4. Murillo Huertas, Inés P. & Ramos, Raul & Simón, Hipólito, 2017. "Revisiting Interregional Wage Differentials: New Evidence from Spain with Matched Employer-Employee Data," IZA Discussion Papers 11122, Institute for the Study of Labor (IZA).

    More about this item

    Keywords

    federalism; regions; Belgium; collective bargaining; wages;

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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