Collective Wage Contracts, Opt‐Out Clauses, and Firm Wage Differentials: Evidence from Linked Employer-Employee Data

18 Pages Posted: 23 Jun 2012

See all articles by Alfred Garloff

Alfred Garloff

Center for European Economic Research (ZEW)

Nicole Guertzgen

affiliation not provided to SSRN

Date Written: July 2012

Abstract

Using a large linked employer–employee data set, this article studies whether the existence and use of flexibility provisions within centralized collective wage agreements alter the structure of pay across employers. Using level regressions and first‐difference methods, we find that - compared with contracts without any flexibility - wages under opt‐out clauses are more responsive to local profitability conditions in below‐average‐performing establishments. In contrast, the sensitivity of wages to local profitability is smaller in high‐performance establishments. Our results provide further evidence for a threat potential of the existence of opt‐out clauses whose impact on flexibility is larger than the real application.

JEL Classification: J31, J51

Suggested Citation

Garloff, Alfred and Guertzgen, Nicole, Collective Wage Contracts, Opt‐Out Clauses, and Firm Wage Differentials: Evidence from Linked Employer-Employee Data (July 2012). Industrial Relations: A Journal of Economy and Society, Vol. 51, Issue 3, pp. 731-748, 2012, Available at SSRN: https://ssrn.com/abstract=2089655 or http://dx.doi.org/10.1111/j.1468-232X.2012.00698.x

Alfred Garloff

Center for European Economic Research (ZEW) ( email )

P.O. Box 10 34 43
L 7,1 D-68161 Mannheim
Germany

Nicole Guertzgen

affiliation not provided to SSRN

No Address Available

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