Preferences for Collective versus Individualised Wage Setting

Tito Boeri and Michael Burda

No 3365, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Standard models of equilibrium unemployment assume exogenous labour market institutions and flexible wage determination. This paper models wage rigidity and collective bargaining endogenously, when workers differ by observable skill and may adopt either individualized or collective wage bargaining. In the calibrated model, a substantial fraction of workers and firms as well as the median voter prefer collective bargaining to the decentralised regime. A fundamental distortion of the separation decision represented by employment protection (a firing tax) is necessary for such preferences to emerge. Endogenizing collective bargaining can significantly modify comparative statics effects of policy arising in a single-regime setting.

Keywords: wage rigidity; employment protection; equilibrium unemployment (search for similar items in EconPapers)
JEL-codes: D7 J5 J6 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2008-02
New Economics Papers: this item is included in nep-bec, nep-lab and nep-ltv
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published - published in Economic Journal, 2009, 119, 1440-1463.

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Related works:
Journal Article: Preferences for Collective Versus Individualised Wage Setting (2009)
Journal Article: Preferences for Collective Versus Individualised Wage Setting (2009)
Working Paper: Preferences for collective versus individualised wage setting (2008)
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