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Organised Labour, Labour Market Imperfections, and Employer Wage Premia

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  • Sabien Dobbelaere

    (Vrije Universiteit Amsterdam)

  • Boris Hirsch

    (Halle Institute for Economic Research (IWH))

  • Steffen Mueller

    (Halle Institute for Economic Research (IWH))

  • Georg Neuschaeffer

    (Halle Institute for Economic Research (IWH))

Abstract

This paper examines how collective bargaining through unions and workplace co-determination through works councils shape labour market imperfections and how labour market imperfections matter for employer wage premia. Based on representative German plant data for the years 1999-2016, we document that labour market imperfections are the norm rather than the exception. Wage mark-downs, that is wages below the marginal revenue product of labour rooted in employers' monopsony power, are the most prevalent outcome. We further find that both types of organised labour are accompanied by a smaller prevalence and intensity of wage mark-downs whereas the opposite holds for wage mark-ups, that is wages above the marginal revenue product of labour rooted in workers' monopoly power. Finally, we document a close link between our production-based labour market imperfection measures and employer wage premia. The prevalence and intensity of wage mark-downs are associated with a smaller level and larger dispersion of premia whereas wage mark-ups are only accompanied by a higher premium level.

Suggested Citation

  • Sabien Dobbelaere & Boris Hirsch & Steffen Mueller & Georg Neuschaeffer, 2020. "Organised Labour, Labour Market Imperfections, and Employer Wage Premia," Tinbergen Institute Discussion Papers 20-081/V, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20200081
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    3. 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).

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    More about this item

    Keywords

    Wage mark-downs; wage mark-ups; collective wage agreements; works councils; employer wage premia;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • 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
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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