To Bind or Not to Bind Collectively - Decomposition of Bargained Wage Differences Using Counterfactual Distributions

Publication Type

Working paper

Authors

Heinbach, W. D. / Spindler, M.

Year of publication

2007

Series/labeling

Diskussionspapiere aus dem Institut für Volkswirtschaftslehre der Universität Hohenheim

ISBN / ISSN / eISSN

0930-8334

Keywords

Löhne, Tarifautonomie

Collective bargaining agreements still play an important role in the German wage setting
system. Both existing theoretical and empirical studies find that collective bargaining
leads to higher wages compared to individually agreed ones. However, the impact of collective
bargaining on the wage level may be very different along the wage distribution.
As unions aim at compressing the wage distribution, one might expect that for covered
workers’ wages in the lower part of the distribution workers’ individual characteristics
may be less important than the coverage by a collective contract. In contrast, the relative
importance of workers’ individual characteristics may rise in the upper part of the wage
distribution, whereas the overall wage difference might decline. Using the newly available
German Structure of Earnings Survey (GSES) 1995 and 2001, a cross-sectional linked
employer-employee-dataset from German official statistics, this study analyses the difference
between collectively and individually agreed wages using a Machado/Mata (2005)
decomposition type technique.