IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Collective versus Decentralized Wage Bargaining and the Efficient Allocation of Resources

Listed author(s):
  • Xiaoming Cai

    (VU University Amsterdam)

  • Pieter A. Gautier

    (VU University Amsterdam)

  • Makoto Watanabe

    (VU University Amsterdam)

This discussion paper led to a publication in Labour Economics . An advantage of collective wage agreement is that search and business-stealing externalities can be internalized. A disadvantage is that it takes more time before an optimal allocation is reached because more productive firms (for a particular worker type) can no longer signal this by posting higher wages. Specifically, we consider a search model with two sided heterogeneity and on-the-job search. We compare the most favorable case of a collective wage agreement (i.e. the wage that a planner would choose under the constraint that all firms in a sector-occupation cell must offer the same wage) with the case without collective wage agreement. We find that collective wage agreements are never desirable if firms can commit ex ante to a wage and only desirable if firms cannot commit and the relative efficiency of on the job search to off- the job search is less than 20%. This result is hardly sensitive to the bargaining power of workers. Empirically we find both for the Netherlands and the US that this value is closer to 50%.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://papers.tinbergen.nl/12086.pdf
Download Restriction: no

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 12-086/3.

as
in new window

Length:
Date of creation: 28 Aug 2012
Handle: RePEc:tin:wpaper:20120086
Contact details of provider: Postal:
Gustav Mahlerplein 117, 1082 MS Amsterdam

Phone: +31 (0)20 598 4580
Web page: http://www.tinbergen.nl/
Email:


More information through EDIRC

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.:

as
in new window


  1. Pieter A. Gautier & Coen N. Teulings, 2015. "Sorting And The Output Loss Due To Search Frictions," Journal of the European Economic Association, European Economic Association, vol. 13(6), pages 1136-1166, December.
  2. Jeremy Lise & Costas Meghir & Jean-Marc Robin, 2013. "Mismatch, Sorting and Wage Dynamics," Cowles Foundation Discussion Papers 1886, Cowles Foundation for Research in Economics, Yale University.
  3. DiNardo, John & Fortin, Nicole M & Lemieux, Thomas, 1996. "Labor Market Institutions and the Distribution of Wages, 1973-1992: A Semiparametric Approach," Econometrica, Econometric Society, vol. 64(5), pages 1001-1044, September.
  4. Krusell, Per & Rudanko, Leena, 2016. "Unions in a frictional labor market," Journal of Monetary Economics, Elsevier, vol. 80(C), pages 35-50.
  5. Gautier, P.A. & van den Berg, G. & van Ours, J.C. & Ridder, G., 1999. "Separations at the firm level," Other publications TiSEM 0bc95b07-e6ff-4899-87a6-4, Tilburg University, School of Economics and Management.
  6. Marimon, Ramon & Zilibotti, Fabrizio, 1999. "Unemployment vs. Mismatch of Talents: Reconsidering Unemployment Benefits," Economic Journal, Royal Economic Society, vol. 109(455), pages 266-291, April.
  7. Diamond, Peter A, 1982. "Aggregate Demand Management in Search Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 90(5), pages 881-894, October.
  8. Delacroix, Alain, 2006. "A multisectorial matching model of unions," Journal of Monetary Economics, Elsevier, vol. 53(3), pages 573-596, April.
  9. Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, vol. 95(1), pages 25-49, March.
  10. Matthew S. Dey & Christopher J. Flinn, 2005. "An Equilibrium Model of Health Insurance Provision and Wage Determination," Econometrica, Econometric Society, vol. 73(2), pages 571-627, 03.
  11. Gerard J. van den Berg & Geert Ridder, 1998. "An Empirical Equilibrium Search Model of the Labor Market," Econometrica, Econometric Society, vol. 66(5), pages 1183-1222, September.
  12. Fabien Postel-Vinay & Jean-Marc Robin, 2002. "Equilibrium Wage Dispersion with Worker and Employer Heterogeneity," Econometrica, Econometric Society, vol. 70(6), pages 2295-2350, November.
  13. Blau, Francine D. & Kahn, Lawrence M., 1999. "Institutions and laws in the labor market," Handbook of Labor Economics,in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 25, pages 1399-1461 Elsevier.
  14. Hartog, Joop & Leuven, Edwin & Teulings, Coen, 2002. "Wages and the bargaining regime in a corporatist setting: the Netherlands," European Journal of Political Economy, Elsevier, vol. 18(2), pages 317-331, June.
  15. Coles, Melvyn & Mortensen, Dale T., 2011. "Equilibrium Wage and Employment Dynamics in a Model of Wage Posting without Commitment," IZA Discussion Papers 5900, Institute for the Study of Labor (IZA).
  16. Bruce C. Fallick & Charles A. Fleischman, 2004. "Employer-to-employer flows in the U.S. labor market: the complete picture of gross worker flows," Finance and Economics Discussion Series 2004-34, Board of Governors of the Federal Reserve System (U.S.).
  17. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, July.
  18. Andreas Hornstein & Per Krusell & Giovanni L. Violante, 2011. "Frictional Wage Dispersion in Search Models: A Quantitative Assessment," American Economic Review, American Economic Association, vol. 101(7), pages 2873-2898, December.
  19. Teulings,Coen & Hartog,Joop, 2008. "Corporatism or Competition?," Cambridge Books, Cambridge University Press, number 9780521049399, February.
  20. Shimer, Robert, 2006. "On-the-job search and strategic bargaining," European Economic Review, Elsevier, vol. 50(4), pages 811-830, May.
  21. Card, David, 1996. "The Effect of Unions on the Structure of Wages: A Longitudinal Analysis," Econometrica, Econometric Society, vol. 64(4), pages 957-979, July.
  22. Pieter A. Gautier & Coen N. Teulings & Aico Van Vuuren, 2010. "On-the-Job Search, Mismatch and Efficiency ," Review of Economic Studies, Oxford University Press, vol. 77(1), pages 245-272.
  23. Pissarides, Christopher A, 1986. "Trade Unions and the Efficiency of the Natural Rate of Unemployment," Journal of Labor Economics, University of Chicago Press, vol. 4(4), pages 582-595, October.
  24. Lindbeck, Assar & Snower, Dennis J, 1986. "Wage Setting, Unemployment, and Insider-Outsider Relations," American Economic Review, American Economic Association, vol. 76(2), pages 235-239, May.
  25. Belzil, Christian, 1996. "Relative Efficiencies and Comparative Advantages in Job Search," Journal of Labor Economics, University of Chicago Press, vol. 14(1), pages 154-173, January.
  26. Arthur J. Hosios, 1990. "On The Efficiency of Matching and Related Models of Search and Unemployment," Review of Economic Studies, Oxford University Press, vol. 57(2), pages 279-298.
  27. Melvyn G. Coles, 2001. "Equilibrium Wage Dispersion, Firm Size and Growth," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 4(1), pages 159-187, January.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:tin:wpaper:20120086. 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: (Tinbergen Office +31 (0)10-4088900)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.