Rent‐sharing and Collective Bargaining Coverage: Evidence from Linked Employer–Employee Data

Abstract

Using a linked employer-employee data set, this paper analyses the relationship between …rm-pro…tability and wages. Particular emphasis is given to the question of whether the sensitivity of wages to …rm-speci…c rents varies with collective bargaining coverage. To address this issue, we distinguish sectorspeci…c wage agreements, …rm-speci…c wage agreements and wage determination without any bargaining coverage. Our …ndings indicate that individual wages are positively related to …rm-speci…c rents in the non-union sector and under …rm-speci…c contracts. Industry-wide wage contracts, however, seem to suppress …rm-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. Di¤erenced GMM estimates accounting for the endogeneity of our pro…tability measure even point to a negative relationship under centralised contracts. Non-technical summary: This paper analyses whether wages in Germany respond to …rm-speci…c pro…tability conditions. Particular emphasis is given to the question of whether the sensitivity of wages to …rm-speci…c rents varies with collective bargaining coverage. To address this issue, we distinguish sector-speci…c wage agreements, …rm-speci…c wage agreements and wage determination without any bargaining coverage. Theoretical considerations lead us to expect the sensitivity of wages to …rm-speci…c rents to be larger under …rm-speci…c contracts than in non-covered …rms. The same is likely to hold for industry-wide agreements, provided the bargaining parties make use of ‡exibility provisions, which recently have become a widespread element of central wage agreements. Since direct information on the use of ‡exibility provisions in …rms subject to an industry-wide wage agreement is unavailable, we take our empirical …ndings as an indirect test of whether the use of such provisions is a quantitatively important phenomenon in Germany.Using linked employer-employee data from the mining and manufacturing sector, our empirical analysis o¤ers a remarkably consistent picture: Individual wages are positively related to …rm-speci…c quasi-rents, but this appears to be con…ned to the non-union sector and to …rm-speci…c contracts. Industry-wide wage agreements, in contrast, appear to suppress rent-sharing at the …rm level. 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. Di¤erenced GMM estimates accounting for the endogeneity of our pro…tability measure even point to a negative relationship between wages and …rm-speci…c pro…tability under centralised contracts. Although this result is di¢ cult to interpret, it leads us to conclude that the lower responsiveness of wages to …rm-speci…c conditions under centralised contracts is not simply due to a downward-...

Trade, Wages, and Collective Bargaining: Evidence from France

“…The effect of exports is positive irrespective of the bargaining regime, and higher under firm-than industry-level bargaining. This result mimics the findings of closed economy studies showing that wages tend to be more responsive to profitability shocks under firm-than industry-level bargaining (e.g., Gürtzgen, 2009). We find a negative effect of offshoring shocks in firms without collective agreements.…”

“…Of interest to our analysis is how the level of centralisation of bargaining affects wage outcomes (e.g., Calmfors and Driffill, 1988). A general prediction is that wages are more tightly linked to profits under firm-level than under more centralised bargaining levels (i.e., industry or national), because trade unions are concerned with idiosyncratic profitability shocks (see Gürtzgen, 2009 for empirical evidence). Most available evidence shows wage levels are higher under firm-than under industry-level bargaining, especially in countries with multi-level bargaining systems (e.g., Card and de la Rica, 2006;Plasman et al, 2007;Dahl et al, 2013).…”

Estimating the Wage Premium of Collective Wage Contracts - Evidence from Longitudinal Linked Employer-Employee Data

“…also those who are not employed by the regime switchers in period t. We further exclude from these individuals those who are also subject to a change in contract status in t − 1, t − 2, t + 1 and t + 2, respectively. 25 Note that the discussion in Section 3.1 has shown that positive differences in pre-transition wage growth may not rule out mere anticipation effects as firms are generally free to pay higher 23 gives rise to significantly negative wage premiums of firm-level contracts in t and t + 1.…”

“…Oi and Idson (1999), German evidence on employer size effects is provided by Schmidt and Zimmermann (1991). Hildreth and Oswald (1997) and Arai (2003) present international evidence on the wage-profit relationship, while evidence for Germany is documented in Hübler and König (1998) and Guertzgen (2009). 17 The number of individuals affected by each transition is reported in Table 5.…”

“…The estimated difference in pretransition wage growth in t−1 is found to be positive and significant, indicating that wages for these regime changers did rise relatively stronger prior to the transition year. 25 With respect to the pre-transition differentials in wage growth in t − 1, this 24 This amounts to estimating eq. (4) including the respective lags and leads of a dummy variable that indicates the change in contract status in t. To estimate the pre and post-transition wage growth differentials, we include all individuals in the respective time periods, i.e.…”