On the Quantitative Importance of Wage Bargaining Models

European Economic Review, 1991

In this paper we propose a test that discriminates among alternative models of bargaining for wages and employment. The test rests on a theoretical framework which encompasses both the labour demand and the efficient bargain models of wage and employment determination. It is based on testing the cross equation restrictions implied for the coefftcients of union power variables in reduced form wage and employment equations. The test is illustrated for the Layard and Nickel1 model of the aggregate UK labour market, for which it is found that one can reject both the labour demand model and the hypothesis that wage employment bargains are efficient, in favour of a generalised model of inefficient bargaining for wages and employment.

Empirical Economics, 2009

The initial works council's wage claim, and the initial firm's (counter)offer, as well as the fraction of the disputed wages the works council is able to capture conditional on initial disagreement, are analyzed using Spanish data on wage settlements. After a given initial wage claim, the rules of the system force the firm either to accept it or to make a counteroffer prior to a fixed and short deadline. In this context signaling models predict that the wage claim should try to screen the firm's level of profitability, while the (most likely forced) offer is expected to reveal little information. Both hypotheses are tested and neither one is rejected. The analysis of the fraction of the disputed wages the workers get after initial disagreement, as well as the length of the negotiation period, provide further evidence in favor of signaling models since we find they are related to both observed and private information. Moreover, conditional on covariates, for a number of sectors we cannot reject that the parties "split the difference" between both initial offers. This solution coincides with Rubinstein's (1982) wage, the solution for the complete information game.

Economic Theory, 2001

Short-term contracts and exogenous productivity growth are introduced in a simple wage bargaining model. The equilibrium utilities corresponding to militant union behaviour are independent of the contract length. The wage dynamics are linear if strike is credible low w age shares and nonlinear otherwise high wage shares. The model can admit two steady state wage shares. The one under strike is not credible exceeds the one under strike is credible. A w age decrease can occur if strike is credible, but never when strike is not credible. In the limit as time between bargaining rounds vanishes only the rst paradox survives.

Journal of Political Economy, 1986

1989

This paper studies the determinants of real wage rates using data on Canadian labour contracts signed between 1978 and 1984.

2009

In labour economics theory, wage negotiations use to rely on a Symmetric Nash Bargaining Solution. The aim of this study is to show that this kind of solution may be not relevant. Indeed, in a matching model framework, the comparison with the Kalai-Smorodinsky Solution suggests that a reflection should systematically be made with respect to the negotiation power of each

Economic Letters, 2012

This article appeared in a journal published by Elsevier. The attached copy is furnished to the author for internal non-commercial research and education use, including for instruction at the authors institution and sharing with colleagues.

Games and Economic Behavior, 2003

In a model where many workers bargain with one firm and sign binding contracts, we show existence of a stationary subgame perfect equilibrium. If the production function satisfies decreasing returns, each worker receives a share of his marginal product (treating all other workers as employed) in equilibrium. Thus, wages are competitive. This is in contrast to Stole and Zweibel (1996, Rev. Econ. Stud. 63, 375-410), who assume that contracts are non-binding and find that the payoff of a worker is a weighted average of the inframarginal contributions. Hence, binding contracts imply lower wages than non-binding contracts.

Manchester School, 2003

2007

The paper examines the role of collective bargaining systems as a determinant of the inter-industry wage structure. It compares wage patterns of six countries: Austria, Canada, Germany, Norway, Sweden and the U.S.. We use comparable wage regressions from micro cross-sections data to calculate inequality in pay across sectors. Our findings suggest the following: First, high (low) wage sectors in one country tend to be high (low) wage sectors in others, irrespective of the (dis)similarity in labor market institutions. Second, differences in the amount of pay inequality are likely to be the result of differences in collective bargaining: more centralized bargaining structures tend to narrow pay differentials across industries.

World Politics, 2004

SSRN Electronic Journal, 2000

2010

From the mid-1990s onwards, Swedish wage bargaining has been characterised by informal co-ordination of the wage claims of big unions and bargaining cartels. In particular, it has been understood that the manufacturing sector should lead by first agreeing on a pay increase, whereafter the service sector and public sector unions choose a similar increase. We analyse his setup with two possible theoretical interpretations: (i) the manufacturing sector as a tackelberg leader and (ii) a normative role for the manufacturing sector’s pay increase, upported either by unmodelled social pressure or a modeled loss aversion (envy) of the heltered sector unions. The conclusion of the analysis is that the normative or leading role of one sector – in the Swedish case the manufacturing sector – can potentially bring big benefits for employment and output. Generalising an idea suggested by Lars Calmfors and Anna Larsson, our analysis also generates a rudimentary theory of why the wage increase norm...

Working Paper Series, 2006

We analyze unique data that identify whether individuals have participated in decentralized wage setting and whether they have negotiated their own wages. Wages are significantly higher for those who have been part of a formalized wagesetting process compared with non-participants, but only in the public sector. Employees who negotiate their own wages have higher wages than nonnegotiators. Wages are also significantly higher for those who negotiate with a manager who has the power to set wages, compared with those who negotiate with a manager who has no power over wages. This concerns employees in the public and the private sectors. Quantile regression results reveal that the outcome of individual bargaining increases over the wage distribution. Percentile wage differences are significant only among workers who negotiate with a manager who has the power to set wages. Estimated wage differences between negotiators and non-negotiators are 4.6% on average, 5.6% in the 90 th percentile, and 2.3% at the 10 th percentile.

Journal of Labor Economics, 2005

How does a typically European bargaining system, with collective bargaining and national minimum wage, coexist with low unemployment and high wage flexibility? A unique data set on workers, firms, and collective bargaining contracts in Portugal is used to analyze the determinants of both the contractual wage and the wage cushion (difference between contractual and actual wages). The results indicate that the wage cushion stretches the returns to worker and firm attributes, whereas it shrinks the returns to union power. Therefore, firm-specific arrangements partly offset collective bargaining, granting firms certain freedom when setting wages. Contractual wages reflect trade unions' egalitarian policy.