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Wage Centralization, Union Bargaining, and Macroeconomic Performance

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  • Mr. James McHugh

Abstract

This paper addresses two questions. First, under what circumstances will a centralized wage-bargaining system offer higher output and employment than a decentralized system? Second, what is the relationship between the degree of wage centralization and inflation? The paper argues that centralized wage setting may offer worse outcomes, despite the existence of a negative coordination externality in decentralized wage setting. This is more likely to occur when the legal and institutional environment strengthens the bargaining position of the union in the centralized regime compared with unions operating in a more decentralized regime. Furthermore, as product markets become more competitive, the macroeconomic outcomes in both regimes converge, and the degree of wage centralization becomes irrelevant.

Suggested Citation

  • Mr. James McHugh, 2002. "Wage Centralization, Union Bargaining, and Macroeconomic Performance," IMF Working Papers 2002/143, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2002/143
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    References listed on IDEAS

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    Cited by:

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    3. Michael Berlemann & Klaus W. Zimmermann, 2011. "Trade Unionists in Parliament and Macroeconomic Performance: Evidence from Germany," The Economic and Labour Relations Review, , vol. 22(3), pages 101-116, November.
    4. Daniels, Joseph P. & Nourzad, Farrokh & VanHoose, David D., 2006. "Openness, centralized wage bargaining, and inflation," European Journal of Political Economy, Elsevier, vol. 22(4), pages 969-988, December.
    5. Jeanfils, Philippe & Burggraeve, Koen, 2008. ""NONAME": A new quarterly model for Belgium," Economic Modelling, Elsevier, vol. 25(1), pages 118-127, January.
    6. Horst Feldmann, 2013. "Banking System Concentration And Labor Market Performance In Industrial Countries," Contemporary Economic Policy, Western Economic Association International, vol. 31(4), pages 719-732, October.
    7. Andrea Bassanini & Romain Duval, 2006. "The Determinants of Unemployment across OECD Countries," Post-Print halshs-00120584, HAL.
    8. Feldmann, Horst, 2015. "Banking system concentration and unemployment in developing countries," Journal of Economics and Business, Elsevier, vol. 77(C), pages 60-78.
    9. Horst Feldmann, 2013. "Real Interest Rate and Labor Market Performance around the World," Southern Economic Journal, John Wiley & Sons, vol. 79(3), pages 659-679, January.

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    Keywords

    WP; real wage; utility function; nominal wage;
    All these keywords.

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