The effect of firm-level contracts on the structure of wages: evidence from matched

David E. Card and Sara De La Rica ()

DFAEII Working Papers from University of the Basque Country - Department of Foundations of Economic Analysis II

Abstract: In Spain, as in several other European countries, sectoral bargaining agreements are automatically extended to cover all firms in an industry. Employers and employees can also negotiate firm-specific contracts. We use a large matched employer-employee data set to study the effects of firm-level contracting on the structure of wages. We estimate conventional wage determination models and a richer set of models that control for the characteristics of coworkers and the probability the workplace is covered by a firm-level contract. Our estimates suggest that firm-level contracting is associated with a 5-10 percent wage premium, with larger premiums for more highly paid workers. Although we cannot decisively test between alternative explanations for the firm-level contracting premium, workers with firm-specific contracts have significantly longer job tenure, suggesting that the premium is at least partially a noncompetitive phenomenon.

JEL-codes: J31 J51 (search for similar items in EconPapers)
Date: 2004-10-10, Revised 2006-11-15
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Published in Industrial and Labour Relations Review, 2006, 59(4), pp. 573-593

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Persistent link: http://EconPapers.repec.org/RePEc:ehu:dfaeii:200406

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Dpto. de Fundamentos del Análisis Económico II, Facultad de CC. Económicas y Empresariales, Universidad del País Vasco, Avda. Lehendakari Aguirre 83, 48015 Bilbao, Spain

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