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How Collective Bargaining Shapes Poverty: New Evidence for Developed Countries

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  • Pineda-Hernández, Kevin
  • Rycx, François
  • Volral, Mélanie

Abstract

Although many studies point to the significant influence of collective bargaining institutions on earnings inequalities, evidence on how these institutions shape poverty rates across developed economies remains surprisingly scarce. It would be a mistake, though, to believe that the relationship between earnings inequalities and poverty is straightforward. Indeed, whereas earnings inequalities are measured at the individual level, poverty is calculated at the household level using equivalised (disposable) incomes. Accordingly, in most developed countries poverty is not primarily an issue of the working poor. This paper explicitly addresses the relationship between collective bargaining systems and working-age poverty rates in 24 developed countries over the period 1990-2015. Using an up-to-date and fine-grained taxonomy of bargaining systems and relying on state-of-the-art panel data estimation techniques, we find that countries with more centralised and/or coordinated bargaining systems display significantly lower working-age poverty rates than countries with largely or fully decentralised systems. However, this result only holds in a post-tax benefit scenario. Controlling for country-fixed effects and endogeneity, our estimates indeed suggest that the poverty-reducing effect of collective bargaining institutions stems from the political strength of trade unions in promoting public social spending rather than from any direct effect on earnings inequalities.

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  • Pineda-Hernández, Kevin & Rycx, François & Volral, Mélanie, 2021. "How Collective Bargaining Shapes Poverty: New Evidence for Developed Countries," GLO Discussion Paper Series 877, Global Labor Organization (GLO).
  • Handle: RePEc:zbw:glodps:877
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    More about this item

    Keywords

    Collective bargaining systems; poverty rates; social security expenditures; panel data; advanced economies;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • J52 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Dispute Resolution: Strikes, Arbitration, and Mediation

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