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Organised labour, labour market imperfections, and employer wage premia

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  • Dobbelaere, Sabien
  • Hirsch, Boris
  • Müller, Steffen
  • Neuschäffer, Georg

Abstract

This paper examines how collective bargaining through unions and workplace co-determination through works councils relate to labour market imperfections and how labour market imperfections relate to employer wage premia. Based on representative German plant data for the years 1999-2016, we document that 70% of employers pay wages below the marginal revenue product of labour and 30% pay wages above. We further find that the prevalence of wage mark-downs is signifi cantly smaller when organised labour is present and that the ratio of wages to the marginal revenue product of labour is significantly bigger. Finally, we document a close link between labour market imperfections and mean employer wage premia, that is wage differences between employers corrected for worker sorting.

Suggested Citation

  • Dobbelaere, Sabien & Hirsch, Boris & Müller, Steffen & Neuschäffer, Georg, 2023. "Organised labour, labour market imperfections, and employer wage premia," IWH Discussion Papers 20/2022, Halle Institute for Economic Research (IWH), revised 2023.
    • Handle: RePEc:zbw:iwhdps:202022
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    Cited by:

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    2. Mertens, Matthias, 2022. "Micro-mechanisms behind declining labor shares: Rising market power and changing modes of production," International Journal of Industrial Organization, Elsevier, vol. 81(C).
    3. Steffen Mueller & Georg Neuschaeffer, 2021. "Worker Participation in Decision‐making, Worker Sorting, and Firm Performance," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 60(4), pages 436-478, October.

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    More about this item

    Keywords

    collective wage agreements; employer monopsony; employer wage premia; labour market power; wage mark-downs; wage mark-ups; worker monopoly; works councils;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General

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