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Wage Dispersion and Decentralization of Wage Bargaining

  • Christian M. Dahl

    (School of Economics and Management, University of Aarhus)

  • Daniel le Maire

    (Department of Economics, University of Copenhagen)

  • Jakob R. Munch

    (Department of Economics, University of Copenhagen)

This paper studies how decentralization of wage bargaining from sector to firm level influences wage levels and wage dispersion. We use a detailed panel data set covering a period of decentralization in the Danish labor market. The decentralization process provides exogenous variation in the individual worker's wage-setting system that facilitates identification of the effects of decentralization. Consistent with predictions we find that wages are more dispersed under firm-level bargaining compared to more centralized wage-setting systems. However, the differences across wage-setting systems are reduced substantially when controlling for unobserved individual level heterogeneity.

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Paper provided by University of Copenhagen. Department of Economics in its series Discussion Papers with number 09-15.

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Length: 25 pages
Date of creation: Aug 2009
Date of revision:
Handle: RePEc:kud:kuiedp:0915
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