Firm-Level Agreements and Wage Inequality in France

This article examines wage inequalities induced by firm-level collective agreements. While European literature on firm-level collective bargaining often identifies a wage premium associated with firm-level agreements, we seek to go beyond this finding by studying the effects on the distribution of wages within and between firms. To do so, we use the AKM (Abowd-Kramarz-Margolis) estimation method, previously applied by Song et al. (2018) and Babet, Godechot, and Palladino (2025), who studied the variance of individual log hourly wages. Our indicator for firm-level agreement presence carries no direct explanatory power in the year the agreement is signed. However, wage inequalities are systematically higher in firms that have signed a wage agreement over the full sample period, reaching 0.0195 for firms with 50–99 employees, 0.0284 for firms with 100–249 employees, and 0.0487 for firms with 500 or more employees. This difference is driven primarily by the within-firm component of wage inequality, which is higher in firms signing FLAs (Firm-Level-Agreements) and increases further with firm size. These findings suggest that the culture of negotiation within companies, rather than the act of signing an agreement itself, can contribute to a raise of wage inequalities in companies signing FLAs.