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Bargaining power and wages: Collective wage agreements and union membership in Germany

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  • Höne, Sarah
  • Rehm, Miriam

Abstract

This paper investigates whether workers' bargaining power, which extends beyond union membership to collective wage agreements in Germany, affects the level and distribution of wages at the regional level. We conduct fixed-effect regression analysis and a DFL decomposition on SOEP data from 2014 to 2021 and find, first, that both collective wage agreements and union membership statistically and economically significantly raise wage levels at the national level. Second, and importantly, this effect is regionally heterogeneous: Collective wage agreements continue to be linked to higher wages at the regional level, whereas the relationship is weakened or disappears altogether for union membership. Third, collective wage agreements go along with lower overall wage inequality, while union membership compresses wage inequality mainly at the lower end of the distribution.

Suggested Citation

  • Höne, Sarah & Rehm, Miriam, 2025. "Bargaining power and wages: Collective wage agreements and union membership in Germany," ifso working paper series 55, University of Duisburg-Essen, Institute for Socioeconomics (ifso).
    • Handle: RePEc:zbw:ifsowp:329630
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    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects

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