Search

Ratio Working Paper No. 241: The effect of decentralized wage bargaining on the structure of wages and firm performance

PublicationWorking paper
Företagandets villkor, Hannes Andréasson
Ratio Working Paper No. 241
Download

Abstract

This paper analyses how decentralised wage bargaining affects wage levels and the structure of wages as well as the impact on firm performance. By using unique employer-employee matched data for Sweden 2007 and 2010, the paper presents new evidence on the collective bargaining premium in Sweden and the linkages between decentralised bargaining and firm performance. By differentiating between decentralised, two-tiered and centralised collective wage bargaining the methodologies of Card and De La Rica (2006); Dahl, le Maire, and Munch (2013); Guertzgen (2014); Gürtzgen (2007); Jakubson (1991) are adopted and adjusted using pooled OLS, first difference OLS, and quantile regressions. Variation in individual worker’s bargaining regime is exploited for identification of the effect of decentralisation. Results indicate that a large share of the wage premium associated with decentralised and two-tiered bargaining is due to systematic selection/sorting into those regimes. Models that take into account individual and firm unobserved heterogeneity indicate that the wage premium associated with decentralised wage bargaining is around 5-7.5% and 0.7-4.1% for two-tiered bargaining. When examining the effect on the wage structure, results indicate that decentralised and two-tiered bargaining compresses the wage structure by awarding relatively higher wage premiums to low-wage earners, in particular in decentralised regimes. At the same time, no evidence is found of higher returns to education in either regime, but both regimes are associated with higher returns to experience than centralised bargaining. Lastly, unique evidence is found of a positive linkage between the level of decentralisation at the firmlevel and value added per employee and firm productivity. This is a novel contribution to the literature that has not yet considered the impact of decentralised wage bargaining on firm performance. Thus there is evidence that the level at which bargaining takes place influences both wage levels and wage structure as well as firm performance.

Andréasson, R. (2006). The effect of decentralized wage bargaining on the structure of wages and firm performance. Ratio Working Paper No. 241.

Based on content

Ratio Working Paper No. 241: The effect of decentralized wage bargaining on the structure of wages and firm performance
Working paperPublication
Andréasson, R.
Publication year

2006

Published in

Ratio Working Paper

Abstract

This paper analyses how decentralised wage bargaining affects wage levels and the structure of wages as well as the impact on firm performance. By using unique employer-employee matched data for Sweden 2007 and 2010, the paper presents new evidence on the collective bargaining premium in Sweden and the linkages between decentralised bargaining and firm performance. By differentiating between decentralised, two-tiered and centralised collective wage bargaining the methodologies of Card and De La Rica (2006); Dahl, le Maire, and Munch (2013); Guertzgen (2014); Gürtzgen (2007); Jakubson (1991) are adopted and adjusted using pooled OLS, first difference OLS, and quantile regressions. Variation in individual worker’s bargaining regime is exploited for identification of the effect of decentralisation. Results indicate that a large share of the wage premium associated with decentralised and two-tiered bargaining is due to systematic selection/sorting into those regimes. Models that take into account individual and firm unobserved heterogeneity indicate that the wage premium associated with decentralised wage bargaining is around 5-7.5% and 0.7-4.1% for two-tiered bargaining. When examining the effect on the wage structure, results indicate that decentralised and two-tiered bargaining compresses the wage structure by awarding relatively higher wage premiums to low-wage earners, in particular in decentralised regimes. At the same time, no evidence is found of higher returns to education in either regime, but both regimes are associated with higher returns to experience than centralised bargaining. Lastly, unique evidence is found of a positive linkage between the level of decentralisation at the firmlevel and value added per employee and firm productivity. This is a novel contribution to the literature that has not yet considered the impact of decentralised wage bargaining on firm performance. Thus there is evidence that the level at which bargaining takes place influences both wage levels and wage structure as well as firm performance.

Ratio Working Paper No. 241: The effect of decentralized wage bargaining on the structure of wages and firm performance
Working paperPublication
Andréasson, R.
Publication year

2006

Published in

Ratio Working Paper

Abstract

This paper analyses how decentralised wage bargaining affects wage levels and the structure of wages as well as the impact on firm performance. By using unique employer-employee matched data for Sweden 2007 and 2010, the paper presents new evidence on the collective bargaining premium in Sweden and the linkages between decentralised bargaining and firm performance. By differentiating between decentralised, two-tiered and centralised collective wage bargaining the methodologies of Card and De La Rica (2006); Dahl, le Maire, and Munch (2013); Guertzgen (2014); Gürtzgen (2007); Jakubson (1991) are adopted and adjusted using pooled OLS, first difference OLS, and quantile regressions. Variation in individual worker’s bargaining regime is exploited for identification of the effect of decentralisation. Results indicate that a large share of the wage premium associated with decentralised and two-tiered bargaining is due to systematic selection/sorting into those regimes. Models that take into account individual and firm unobserved heterogeneity indicate that the wage premium associated with decentralised wage bargaining is around 5-7.5% and 0.7-4.1% for two-tiered bargaining. When examining the effect on the wage structure, results indicate that decentralised and two-tiered bargaining compresses the wage structure by awarding relatively higher wage premiums to low-wage earners, in particular in decentralised regimes. At the same time, no evidence is found of higher returns to education in either regime, but both regimes are associated with higher returns to experience than centralised bargaining. Lastly, unique evidence is found of a positive linkage between the level of decentralisation at the firmlevel and value added per employee and firm productivity. This is a novel contribution to the literature that has not yet considered the impact of decentralised wage bargaining on firm performance. Thus there is evidence that the level at which bargaining takes place influences both wage levels and wage structure as well as firm performance.

Ratio Working Paper No. 349: Industrial conflict in essential services in a new era – Swedish rules in a comparative perspective
Working paperPublication
Karlson, N.
Publication year

2021

Published in

Ratio Working Paper

Abstract

This paper examines whether the Swedish regulatory system of dealing with industrial conflicts that affect essential services need an update or reform. Are the existing rules effective in a world where many essential services are upheld by many interdependent agents in complex systems where every single node becomes critical for the functioning of the system, and where the essential service activities could be either private or public? A comparative study is conducted with the corresponding regulatory systems of the United Kingdom, Germany, and Denmark.
The conclusion is that Sweden is a special case. The Swedish protection against and readiness in dealing with societally harmful industrial conflicts in essential services is weaker than in the countries of comparison. Just as in relation to other threats to essential services, it is not sustainable to claim that just because such a threat is not currently present, there would be no need for preparedness.
There are many alternative ways to handle this. Desirable methods should both prevent harmful conflicts from erupting and end conflicts that have grown harmful to society at a later stage. The labour market organisations should have a mutual interest in reforming the rules.

Show more