Rent-Sharing and Collective Bargaining Coverage – Evidence from Linked Employer-Employee Data

Using a linked employer-employee data set, this paper analyses the relationship between firm-profitability and wages. Particular emphasis is given to the question of whether the sensitivity of wages to firm-specific rents varies with collective bargaining coverage. To address this issue, we distinguish sector-specific wage agreements, firm-specific wage agreements and wage determination without any bargaining coverage. Our findings indicate that individual wages are positively related to firm-specific rents in the non-union sector and under firm-specific contracts. Industry-wide wage contracts, however, seem to suppress firm-level rent-sharing. While pooled OLS estimates yield a positive correlation between wages and quasi-rents under centralised contracts, estimates accounting for unobserved individual and establishment heterogeneity point to a coefficient of zero. Differenced GMM estimates accounting for the endogeneity of our profitability measure even point to a negative relationship under centralised contracts

The Effect of Firm- ans Industry-Level Contracts on Wages: Evidence from Longitudinal Linked Employer-Employee Data

Using a large linked employer-employee data set, this paper presents new evidence on the collective bargaining wage effect in western and eastern Germany. The novel feature of our analysis is that we use a longitudinal data set. Thus, in contrast to previous studies, we seek to assess the extent to which differences in wages between workers in covered and uncovered firms really represent an effect of collective bargaining coverage, rather than a consequence of the non-random selection of workers and firms into the different regimes. By measuring the relative wage gains or losses of workers employed in firms that change contract status, we obtain estimates that depart considerably from previous results relying on cross-sectional data. Industrylevel contracts in western Germany and firm-level contracts in eastern Germany are associated with a small, but statistically significant average wage premium of about 2 per cent. Moreover, wage decompositions indicate that the overall effect of collective bargaining coverage on the returns to observable attributes appears to be negligible once the selection into the regimes is accounted for. --Union Wage Premium,Collective Bargaining Coverage

Rent-sharing : Does the Bargaining Regime Make a Difference? Theory and Empirical Evidence

This paper analyses whether wages in Germany respond to firm-specific profitability conditions. Particular emphasis lies on the question of whether the extent of rent-sharing varies across different systems of wage determination. Those may be categorised into sector-specific wage agreements, firm-specific wage agreements and wage determination without any bargaining coverage. To derive testable hypotheses, we set up a theoretical model that analyses the sensitivity of wages to firm-specific conditions under different wage setting structures. The hypotheses are tested using an establishment-level panel data set from the mining and manufacturing sector. The results of the empirical analysis generally suggest that rent-sharing is present in Germany. However, the extent of rent-sharing is found to be significantly lower in establishments that are subject to a collective wage agreement - irrespective of whether the agreement is industry- or firm-specific. While pooled OLS estimates yield positive estimates of the rent-sharing coefficient in establishments that are covered by a collective contract, SYS-GMM-estimates accounting for unobserved heterogeneity and endogeneity of rents point to a rent-sharing coefficient of zero. --Rent-Sharing,Wage-Setting Structure,Unions,Panel Data

The Effect of Firm- and Industry-Level Contracts on Wages: Evidence from Longitudinal Linked Employer-Employee Data

Using a large linked employer-employee data set, this paper presents new evidence on the wage premium under collective bargaining contracts in western and eastern Germany. The novel feature of our analysis is that we use a longitudinal data set. In contrast to previous studies, we seek to assess the extent to which differences in wages between workers in covered and uncovered firms arise from the non-random selection of workers and firms into the different regimes. By measuring the relative wage gains or losses of workers employed in firms that change contract status, we obtain estimates that depart considerably from previous results relying on cross-sectional data. Industrylevel contracts in western Germany and firm-level contracts in eastern Germany are associated with a small, but statistically significant average wage premium of about 2 per cent. Finally, results from a trend-adjusted differencein - difference approach indicate that the industry-level wage premium in western Germany might be downward biased and the firm-level premium in eastern Germany might still be upward biased, once differences in pre-transition wage growth are accounted for. --Union Wage Premium,Collective Bargaining Coverage

Wage-Employment Bargaining in a Unionized Oligopoly and International Market Integration

In a framework of a n-union/n-firm oligopoly, this paper analyzes the incentive for firms and unions to adopt efficient bargaining, i.e. negotiating over wages together with employment. The analysis is conducted for the case of autarchy and for an integrated product market. Firm profits, union utility and industry rents are compared under two different bargaining regimes - the right-to-manage model and the efficient bargaining model. For centralized negotiations, it is shown that under autarchy bargaining over wages and employment does not necessarily imply efficiency as total industry rents decrease. In the case of an integrated product market, however, adopting efficient bargaining raises rents if the market share of the domestic industry is relatively small.Trade Unions, Oligopoly, Efficient Bargaining, Integration

Rent-Sharing and Collective Bargaining Coverage: Evidence from Linked Employer-Employee Data

Using a linked employer-employee data set, this paper analyses the relationship between firm-profitability and wages. Particular emphasis is given to the question of whether the sensitivity of wages to firm-specific rents varies with collective bargaining coverage. To address this issue, we distinguish sector- specific wage agreements, firm-specific wage agreements and wage determination without any bargaining coverage. Our findings indicate that individual wages are positively related to firm-specific rents in the non-union sector and under firm-specific contracts. Industry-wide wage contracts, however, seem to suppress firm-level rent-sharing. While pooled OLS estimates yield a positive correlation between wages and quasi-rents under centralised contracts, estimates accounting for unobserved individual and establishment heterogeneity point to a coe? cient of zero. Differenced GMM estimates accounting for the endogeneity of our profitability measure even point to a negative relationship under centralised contracts. --Rent-Sharing,Unions,Linked Employer-Employee Data

Rent-Sharing and Collective Bargaining Coverage: Evidence from Linked Employer-Employee Data

Using a linked employer-employee data set, this paper analyses the relationship between firm profitability and wages. Particular emphasis is given to the question of whether the sensitivity of wages to firm-specific rents varies with collective bargaining coverage. To address this issue, we distinguish sector-specific wage agreements, firm-specific wage agreements and wage determination without any bargaining coverage. Our findings indicate that individual wages are positively related to firm-specific quasi-rents in the non-union sector and under firm-specific contracts. Industry-wide wage contracts, however, seem to suppress firm-level rent-sharing. While pooled OLS estimates yield a positive correlation between wages and quasirents under centralised contracts, estimates accounting for unobserved individual and establishment heterogeneity point to a coefficient of zero. Finally, GMM estimates using suitable lagged values as instruments indicate that this result appears to be robust to the endogeneity of quasi-rents. --Rent-Sharing,Unions,Linked Employer-Employee Data

Trade liberalisation and union wages in a differentiated Bertrand duopoly

In a framework of a unionised international Bertrand duopoly with differentiated products, this paper analyses national labour market interdependencies and the consequences of trade liberalisation for union wages. The analysis suggests that national wages are likely to be strategic complements (substitutes), if products are ordinary substitutes (complements). Under the assumption of linear demand it is shown that bilateral trade liberalisation always leads to higher union set wages and union utilities, regardless of the nature of product rivalry. Analysing the consequences of unilateral tariff reductions it is shown that foreign tariff reductions always give rise to higher union wages and utilities, whereas the impact of unilateral domestic tariff reductions depends an the nature of product rivalry.Trade unions, Oligopoly, Intra-industry trade, Market integration

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

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. --Wage-Setting Structure,Unions,Oligopoly,Linked Employer-Employee Data

Revisiting the Impact of Union Structures on Wages: Integrating Different Dimensions of Centralisation

In a framework of a unionised oligopoly, this paper reconsiders the impact of the bargaining structure on union wages. In particular, two dimensions along which centralisation may occur, namely the professional and firm line, are integrated into one modelling framework. It will be shown that, when taking into account different centralisation dimensions, wage outcomes of different bargaining regimes cannot simply be ranked according to the degree of bargaining centralisation. The argument will be that negotiated wages rather depend on the technical relationship between different groups of labour and goods as well as upon the dimension along which centralisation takes place. --Unions,Bargaining Structure,Oligopoly