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Firm Heterogeneity and Wages Under Different Bargaining Regimes: Does a Centralised Union Care for Low-productivity Firms?

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  • Gürtzgen, Nicole

Abstract

This paper studies the relationship between wages and the degree of firm heterogeneity in a given industry under different wage setting structures. To derive testable hypotheses, we set up a theoretical model that analyses the sensitivity of wages to the variability in productivity conditions in a unionsised oligopoly framework. The model distinguishes centralised and decentralised wage determination. The theoretical results predict wages to be negatively associated with the degree of firm heterogeneity under centralised wage-setting, as unions internalise negative externalities of a wage increase for low-productivity firms. We test this prediction using a linked employeremployee panel data set from the German mining and manufacturing sector. Consistent with our hypotheses, the empirical results suggest that under industry-level bargaining workers in more heterogeneous sectors receive lower wages than workers in more homogeneous sectors. In contrast, the degree of firm heterogeneity is found to have no negative impact on wages in uncovered firms and under firm-level contracts.

Suggested Citation

  • Gürtzgen, Nicole, 2009. "Firm Heterogeneity and Wages Under Different Bargaining Regimes: Does a Centralised Union Care for Low-productivity Firms?," ZEW Discussion Papers 08-130, ZEW - Leibniz Centre for European Economic Research.
    • Handle: RePEc:zbw:zewdip:7520
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    Cited by:

    1. Peter Huber & Harald Oberhofer & Michael Pfaffermayr, 2012. "Who Creates Jobs? Estimating Job Creation Rates at the Firm Level," WIFO Working Papers 435, WIFO.

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    More about this item

    Keywords

    Wage-Setting Structure; Unions; Oligopoly; Linked Employer-Employee Data;
    All these keywords.

    JEL classification:

    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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