Risk Aversion, Collective Bargaining, and Wages in Germany

18 Pages Posted: 22 May 2012

See all articles by Laszlo Goerke

Laszlo Goerke

University of Trier - Institute of Labour Law and Industrial Relations in the European Union; CESifo (Center for Economic Studies and Ifo Institute); IZA Institute of Labor Economics

Markus Pannenberg

University of Applied Sciences Bielefeld - Department of Business and Economics; DIW Berlin - GSOEP; Institute for the Study of Labor (IZA), Bonn

Date Written: June 2012

Abstract

We develop an open-shop model of trade union membership in which workers differ in their risk attitudes, and derive conditions under which the bargained wage will fall and union membership will increase with a general rise in risk aversion. Using data from the German Socio-Economic Panel we define broad bargaining units and show that wages decline as average risk aversion of union members in these units rises, controlling for individual effects of risk aversion. Given a negative relationship between wages and employment, this suggests that secular changes in risk attitudes, because of an aging workforce or greater female labour force participation, can help to explain variations in the employment performance of unionized economies.

JEL Classification: J51, J52

Suggested Citation

Goerke, Laszlo and Pannenberg, Markus, Risk Aversion, Collective Bargaining, and Wages in Germany (June 2012). LABOUR, Vol. 26, Issue 2, pp. 156-173, 2012, Available at SSRN: https://ssrn.com/abstract=2064425 or http://dx.doi.org/10.1111/j.1467-9914.2011.00536.x

Laszlo Goerke (Contact Author)

University of Trier - Institute of Labour Law and Industrial Relations in the European Union ( email )

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Trier, 54296
Germany

HOME PAGE: http://www.iaaeu.de/

CESifo (Center for Economic Studies and Ifo Institute)

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IZA Institute of Labor Economics

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Markus Pannenberg

University of Applied Sciences Bielefeld - Department of Business and Economics ( email )

Universitätsstrasse 25
Bielefeld, D-33615
Germany
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+49 521 106-5086 (Fax)

HOME PAGE: http://aix5.fh-bielefeld.de/~mpannenb/index.html

DIW Berlin - GSOEP ( email )

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Berlin, 10117
Germany

Institute for the Study of Labor (IZA), Bonn

P.O. Box 7240
Bonn, D-53072
Germany

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