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The effect of private versus public ownership on labour earnings

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Abstract

We examine the impact of privatisation on wage formation in unionised labour markets. Using longitudinal worker-firm data for Portugal spanning the period 1991-2007, we find that privatisation leads to higher wages, and show that this effect is driven by the fact that privatised firms tend to pay larger mark-ups on the union wage floor. These findings accord with a theoretical model in which actual paid wages are determined via sector-wide collective bargaining and firm-specific "fair-wage" policies, and where private ownership affects wage-setting incentives in both of these stages.

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  • Paulo Bastos & Natália P. Monteiro & Odd Rune Straume, 2011. "The effect of private versus public ownership on labour earnings," NIPE Working Papers 07/2011, NIPE - Universidade do Minho.
  • Handle: RePEc:nip:nipewp:07/2011
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    File URL: http://www3.eeg.uminho.pt/economia/nipe/docs/2011/NIPE_WP_07_2011.pdf
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    1. Paulo Bastos & Natália Pimenta Monteiro & Odd Rune Straume, 2012. "Privatization and corporate restructuring," NIPE Working Papers 10/2012, NIPE - Universidade do Minho.

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    Keywords

    Privatisation; wage formation; trade unions.;

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • 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
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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