Wage Bargaining with On-the-Job Search: Theory and Evidence (original) (raw)

Wage Bargaining with On-the-job Search: A Structural Econometric Model

2002

We write and estimate an equilibrium model with strategic wage bargaining and on-the-job search and use it to take another look at the determinants of wages in France. There are three essential determinants of wages in our model: productivity, competition between employers resulting from on-the-job search, and the workers' bargaining power. We find that between-firm competition matters a lot in the determination of wages. In particular, we detect no significant bargaining power for unskilled workers. However, inter-industry differentials are mainly due to differences in productivity, and bargaining power, in the case of skilled workers.

Does Industrial Composition Matter for Wages? A Test of Search and Bargaining Theory

Econometrica, 2012

Does switching the composition of jobs between low-paying and high-paying industries have important effects on wages in other sectors? In this paper, we build on search and bargaining theory to clarify a key general equilibrium channel through which changes in industrial composition could have substantial effects on wages in all sectors. In this class of models, wage determination takes the form of a social interaction problem and we illustrate how the implied sectoral linkages can be empirically explored using U.S. Census data. We find that sector-level wages interact as implied by the model and that the predicted general equilibrium effects are present and substantial. We interpret our results as highlighting the relevance of search and bargaining theory for understanding the determination of wages and argue that the results provide support for the view that industrial composition is important for understanding wage outcomes.

On-the-Job Search, Minimum Wages, and Labor Market

We are grateful to Fabien Postel-Vinay for pointing out an error in an early draft, and to a discussant of the paper (on more than one occasion), Jaap Abbring, for useful remarks. Helpful comments were received from participants in the Society for Economic Dynamics meetings held in Prague (2007) and the "Structural Models of the Labor Market and Policy Analysis Conference" held at IFS (2008), as well as from seminar participants at Stony Brook, Carlos III, Syracuse, Duke, Queens, Vanderbilt, and the Bank of Israel. We are solely responsible for all errors, omissions, and interpretations.

Trade, Wages and Collective Bargaining: Evidence from France

The Economic Journal, 2015

We estimate the impact of international trade on wages using data for French manufacturing firms. We instrument firm-level trade flows with firm-specific instrumental variables based on world demand and supply shocks. Both export and offshoring shocks have a positive effect on wages.

A Theory of Wages and Labor Demand with Intra-Firm Bargaining and Matching Frictions*

International Economic Review, 2008

Firms are the field of several strategic interactions that both standard neo-classical analysis and search-matching approaches often ignore. Such strategic considerations concern relations between capital owner and labor, relations between marginal employees and incumbents and, more generally, all relations between different groups within the firm with different bargaining positions. This paper provides a synthetic model of the labor market equilibrium with search frictions in a dynamic framework where wage bargaining is influenced by within-firm strategic interactions, with explicit closed form solutions. Accounting for the heterogeneity of labor and different bargaining power of workers drastically change the results compared to the homogeneous labor case. With heterogeneous labor, higher relative bargaining power for some groups may lead to overemployment relative to other groups, such other groups being underemployed if they have a lower relative bargaining power. The overemployment results do not necessarily hold at the macroeconomic level. Finally, the holdup problem between capital owners and employees does not necessarily lead to underinvestment in physical capital as is usually the case. Actually, strategic overemployment can induce over-investment when employees substitutable to capital have strong bargaining power.

Multi-Levels Bargaining and Efficiency in Search Economies

In this note, we extend the traditional search and matching framework to take account of the different levels at which negotiations take place. We show that, in the absence of any distortion, sector-level bargaining ought to be less efficient than bargaining taking place at the other levels. It follows that the introduction of labor market policies as a combination of employment protection, hiring subsidy and payroll tax improves efficiency. This result suggests that the relationship between the level at which bargaining takes place and the labor market performance is far more conditional than most studies acknowledge.

Collective versus decentralized wage bargaining and the efficient allocation of resources

Labour Economics, 2014

In a search model with two sided heterogeneity and on-the-job search, we compare collective bargaining agreements (CBA) with a decentralized bargaining outcome case. Under CBA, a union chooses a pay-scale schedule and the firm can select a wage from this pay scale after observing match quality. An advantage of collective bargaining agreements is that search and business-stealing externalities can be internalized. A disadvantage is that it takes more time before an optimal allocation is reached. What the most desirable system is, depends on worker bargaing power (β) and the relative efficiency of on-versus off-the job search. We find both for the Netherlands and the US that as long as β lies between 0.1 and 0.7, CBA is less desirable. * We thank NWO and the Dutch ministry of social affairs for a research grant.

Understanding Wage Floor Setting in Industry-Level Agreements: Evidence from France

Labor: Public Policy & Regulation eJournal, 2016

This paper examines empirically how industry-level wage floors are set in French industry-level wage agreements and how the national minimum wage (NMW) interacts with industry-level wage bargaining. For this, the authors use a unique dataset containing about 50,000 occupation-specific wage floors in 365 French industries over the period 2007-2015. They find that the NMW has a significant impact on the seasonality and on the timing of the wage bargaining process. Inflation, past sectoral wage increases and real NMW increases are the main drivers of wage floor adjustments; elasticities of wage floors with respect to these macro variables are 0.6, 0.4 and 0.2 respectively. Wage floor elasticities to inflation and to the NMW both decrease along the wage floor distribution but are still positive for all levels of wage floors.