Wage Cyclicality Under Different Regimes of Industrial Relations

28 Pages Posted: 12 Oct 2010

See all articles by Hermann Gartner

Hermann Gartner

Government of the Federal Republic of Germany - Institute for Employment Research (IAB); Friedrich-Alexander-Universität Erlangen-Nürnberg

Thorsten Schank

University of Erlangen-Nuremberg

Claus Schnabel

University of Erlangen-Nuremberg; IZA Institute of Labor Economics

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Abstract

Since there is scant evidence on the role of industrial relations in wage cyclicality, this paper analyzes the effect of collective wage contracts and of works councils on real wage growth. Using linked employer-employee data for western Germany, we find that works councils affect wage growth only in combination with collective bargaining. Wage adjustments to positive and negative economic shocks are not always symmetric. Only under sectoral bargaining there is a (nearly symmetric) reaction to rising and falling unemployment. In contrast, wage growth in establishments without collective bargaining adjusts only to falling unemployment and is unaffected by rising unemployment.

Keywords: wage cyclicality, wage bargaining, works council, Germany

JEL Classification: J31, E32, J53

Suggested Citation

Gartner, Hermann and Schank, Thorsten and Schnabel, Claus, Wage Cyclicality Under Different Regimes of Industrial Relations. IZA Discussion Paper No. 5228, Available at SSRN: https://ssrn.com/abstract=1690066

Hermann Gartner (Contact Author)

Government of the Federal Republic of Germany - Institute for Employment Research (IAB) ( email )

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Thorsten Schank

University of Erlangen-Nuremberg ( email )

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Claus Schnabel

University of Erlangen-Nuremberg ( email )

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