Firm heterogeneity and wages in unionised labour markets: Theory and evidence
In many countries wages are set in two stages, where industry-level collective bargaining is followed by firm-specific arrangements determining actual paid wages as a mark-up on the industry wage floor. What explains the wage set in each of these stages? In this paper we show that both the industry wage floor and the average wage cushion are systematically associated with the degree of firm heterogeneity in the industry: The former (latter) is negatively (positively) associated with the productivity spread. Furthermore, since the response of the wage floor dominates that of the wage cushion, workers in more heterogeneous industries tend to get lower actual paid wages. These conclusions are reached in a model of Cournot oligopoly with firm productivity heterogeneity and a two-tiered wage setting system. They are then confirmed by administrative data covering virtually all workers, firms and collective bargaining agreements of the Portuguese private sector for the period 1991-2000.
|Date of creation:||2008|
|Date of revision:|
|Contact details of provider:|| Postal: Núcleo de Investigação em Políticas Económicas, Escola de Economia e Gestão, Universidade do Minho, P-4710-057 Braga, Portugal|
Phone: +351-253604510 ext 5532
Web page: http://www3.eeg.uminho.pt/economia/nipe/versao_inglesa/index_uk.htm
More information through EDIRC
|Order Information:|| Email: |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Holden, S., 1989.
"Wage Drift And Bargaining: Evidence From Norway,"
348, London School of Economics - Centre for Labour Economics.
- Bastos, Paulo & Kreickemeier, Udo, 2009.
"Unions, competition and international trade in general equilibrium,"
Journal of International Economics,
Elsevier, vol. 79(2), pages 238-247, November.
- Paulo Bastos & Udo Kreickemeier, . "Unions, Competition and International Trade in General Equilibrium," Discussion Papers 08/28, University of Nottingham, GEP.
- Ana Rute Cardoso & Pedro Portugal, 2005. "Contractual Wages and the Wage Cushion under Different Bargaining Settings," Journal of Labor Economics, University of Chicago Press, vol. 23(4), pages 875-902, October.
- Ordine, Patrizia, 1995. "Wage drift and minimum contractual wage: Theoretical interrelationship and empirical evidence for Italy," Labour Economics, Elsevier, vol. 2(4), pages 335-357, December.
- Hartmut Egger & Udo Kreickemeier, 2007.
"Firm Heterogeneity and the Labour Market Effects of Trade Liberalisation,"
CESifo Working Paper Series
2000, CESifo Group Munich.
- Hartmut Egger & Udo Kreickemeier, 2009. "Firm Heterogeneity And The Labor Market Effects Of Trade Liberalization," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(1), pages 187-216, 02.
- Danthine, Jean-Pierre & Kurmann, Andre, 2006.
"Efficiency wages revisited: The internal reference perspective,"
Elsevier, vol. 90(2), pages 278-284, February.
- Danthine, Jean-Pierre & Kurmann, Andre, 2004. "Efficiency Wages Revisited: The Internal Reference Perspective," CEPR Discussion Papers 4503, C.E.P.R. Discussion Papers.
- Holden, S., 1998.
"Wage Drift and the Relevance of Centralised Wage Setting,"
04/1998, Oslo University, Department of Economics.
- Holden, Steinar, 1998. " Wage Drift and the Relevance of Centralised Wage Setting," Scandinavian Journal of Economics, Wiley Blackwell, vol. 100(4), pages 711-31, December.
- Donald R. Davis & James Harrigan, 2007.
"Good Jobs, Bad Jobs, and Trade Liberalization,"
NBER Working Papers
13139, National Bureau of Economic Research, Inc.
- Juan J. Dolado & Florentino Felgueroso & Juan F. Jimeno, .
"The effects of minimum bargained wages on earnings: Evidence from Spain,"
- Dolado, Juan J. & Felgueroso, Florentino & Jimeno, Juan F., 1997. "The effects of minimum bargained wages on earnings: Evidence from Spain," European Economic Review, Elsevier, vol. 41(3-5), pages 713-721, April.
- Thomas Philippon & Francesco Franco, 2005.
"Firms and Aggregate Dynamics,"
2005 Meeting Papers
246, Society for Economic Dynamics.
- Olaf H¸bler & Uwe Jirjahn, 2003.
"Works Councils and Collective Bargaining in Germany: The Impact on Productivity and Wages,"
Scottish Journal of Political Economy,
Scottish Economic Society, vol. 50(4), pages 471-491, 09.
- Hübler, Olaf & Jirjahn, Uwe, 2001. "Works Councils and Collective Bargaining in Germany: The Impact on Productivity and Wages," IZA Discussion Papers 322, Institute for the Study of Labor (IZA).
- Marc J. Melitz, 2003.
"The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity,"
Econometric Society, vol. 71(6), pages 1695-1725, November.
- Mark J. Melitz, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," NBER Working Papers 8881, National Bureau of Economic Research, Inc.
- Melitz, Marc J, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," CEPR Discussion Papers 3381, C.E.P.R. Discussion Papers.
- Frank A. G. Den Butter & Florian Eppink, 2003. "The influence of labour flows on wage drift: an empirical analysis for The Netherlands," Applied Economics Letters, Taylor & Francis Journals, vol. 10(3), pages 139-142.
- Cardoso, Ana Rute, 2006. "Wage mobility: do institutions make a difference?," Labour Economics, Elsevier, vol. 13(3), pages 387-404, June.
- George A. Akerlof & Janet L. Yellen, 1990. "The Fair Wage-Effort Hypothesis and Unemployment," The Quarterly Journal of Economics, Oxford University Press, vol. 105(2), pages 255-283.
- Robert J. Flanagan, 1999. "Macroeconomic Performance and Collective Bargaining: An International Perspective," Journal of Economic Literature, American Economic Association, vol. 37(3), pages 1150-1175, September.
- Manski, C.F., 1991.
"Identification of Endogenous Social Effects: the Reflection Problem,"
9127, Wisconsin Madison - Social Systems.
- Charles F. Manski, 1993. "Identification of Endogenous Social Effects: The Reflection Problem," Review of Economic Studies, Oxford University Press, vol. 60(3), pages 531-542.
- Muysken, Joan & van Veen, Tom, 1996. " Efficiency Wages and Local Wage Bargaining," Scandinavian Journal of Economics, Wiley Blackwell, vol. 98(1), pages 119-27, March.
- Dhillon, Amrita & Petrakis, Emmanuel, 2002. "A generalised wage rigidity result," International Journal of Industrial Organization, Elsevier, vol. 20(3), pages 285-311, March.
- Hibbs, Douglas Jr. & Locking, Hakan, 1996. "Wage compression, wage drift and wage inflation in Sweden," Labour Economics, Elsevier, vol. 3(2), pages 109-141, September.
- Holden, Steinar, 1988. " Local and Central Wage Bargaining," Scandinavian Journal of Economics, Wiley Blackwell, vol. 90(1), pages 93-99.
When requesting a correction, please mention this item's handle: RePEc:nip:nipewp:14/2008. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Maria João Thompson)
If references are entirely missing, you can add them using this form.