The Costs and Benefits of Various Wage Bargaining Structures: An Empirical Exploration
IMF Working Papers, April 1, 2002
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Bibliographic details
- Authors: Alun H. Thomas
- Published: April 1, 2002
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451849257.001
Summary and central finding
- The literature on the relationship between the unemployment rate and wage bargaining fails to separate the offsetting effects of a reduction in competition associated with centralized bargaining and the increased awareness of unemployment externalities.
- This paper uses OECD data to distinguish these effects.
- While wages have become more sensitive to changes in the unemployment rate in countries that have switched to centralized wage-bargaining arrangements, the industry wage is not particularly sensitive to internal factors (relative price and productivity shifts) in economies with centralized/industry-level bargaining arrangements.
- The latter effect (weak sensitivity of industry wages to internal factors) dominates in terms of persistently high unemployment and weaker growth.
Data and empirical approach
- Data source: OECD data (as stated in the summary).
- Empirical focus: distinguishing the effects of (a) reduced competition associated with centralized bargaining and (b) increased awareness of unemployment externalities on the relationship between unemployment and wage bargaining.
Key implications and interpretation
- Centralized wage-bargaining arrangements are associated with greater sensitivity of wages to changes in the unemployment rate.
- Centralized/industry-level bargaining arrangements are associated with industry wages being relatively unresponsive to internal factors such as relative price and productivity shifts.
- The limited responsiveness of industry wages to internal factors is identified as the dominant channel leading to persistently high unemployment and weaker growth.
Subjects and keywords
- Subject: Labor, Real wages, Unemployment rate, Wage adjustments, Wage bargaining, Wages
- Keywords: coefficient estimate, dispersion index, growth rate, internal factors, labor market, market power, real wage restraint, Real wages, standard error, unemployment, Unemployment rate, utility function, Wage adjustments, Wage bargaining, Wages, WP