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Equalizing Wage Differences and Bargaining Power: Evidence from a Panel of French Firms


Pierre Cahuc


National Institute of Statistics and Economic Studies (INSEE) - National School for Statistical and Economic Administration (ENSAE); Université Paris I Panthéon-Sorbonne - Equipe Universitaire de Recherche en Economie Quantitative (EUREQUA); French National Center for Scientific Research (CNRS); Centre for Economic Policy Research (CEPR); Institute for the Study of Labor (IZA)

Christian Gianella


Ministry of the Economy, Finance and Industry (MINEFI) - Direction de la Prevision

Dominique Goux


National Institute of Statistics and Economic Studies (INSEE)

Andre Zylberberg


National Center for Scientific Research (CNRS)

September 2002

IZA Discussion Paper No. 582

Abstract:     
In this paper, we develop a dynamic model of firm-level bargaining, along the lines of Manning (1993). In this context, we provide a firm level wage equation that explicitly accounts for firm heterogeneity. This wage equation explains inter-firm wage differentials by differences in labour productivity and job turnover. More precisely, our model predicts that the higher the rate of job destruction within one firm, the higher the compensation of workers. We estimate our wage equation using matched employer-employee panel data in the manufacturing sector, where firms are tracked for five years, between 1988 and 1992. The empirical estimates, using GMM techniques, are fully consistent with our theoretical prediction of equalizing differences: workers who take into account their intertemporal discounted income will support lower wages when they benefit from lower unemployment risks within their firm. In our model, wages are set to maximize a Nash bargain criterion, and according to the estimators used or the industry we consider, we show that workers have an average bargaining power between 0.15 and 0.25, measured on a scale going from 0 to 1.

Number of Pages in PDF File: 39

Keywords: Collective Bargaining, Equalizing Wage Differences

JEL Classification: J33, J51

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Date posted: October 21, 2002  

Suggested Citation

Cahuc, Pierre and Gianella, Christian and Goux, Dominique and Zylberberg, Andre, Equalizing Wage Differences and Bargaining Power: Evidence from a Panel of French Firms (September 2002). IZA Discussion Paper No. 582. Available at SSRN: http://ssrn.com/abstract=340303

Contact Information

Pierre Cahuc (Contact Author)
National Institute of Statistics and Economic Studies (INSEE) - National School for Statistical and Economic Administration (ENSAE) ( email )
92245 Malakoff Cedex
France
University of Paris 1 Pantheon-Sorbonne - Equipe Universitaire de Recherche en Economie Quantitative (EUREQUA) ( email )
106-112 Boulevard de l'Hopital
Paris Cedex 13, 75647
France
+33 1 4117 3717 (Phone)
+33 1 4117 3724 (Fax)
HOME PAGE: http://eurequa.univ-paris1.fr/membres/cahuc/
French National Center for Scientific Research (CNRS)
106-112 Boulevard de l'Hopital
75647 Paris Cedex 13
France
+33 4 44 07 82 06 (Phone)
+33 4 44 07 82 02 (Fax)
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
Institute for the Study of Labor (IZA)
P.O. Box 7240
Bonn, D-53072
Germany
Christian Gianella
Ministry of the Economy, Finance and Industry (MINEFI) - Direction de la Prevision ( email )
139 rue de Bercy
75012 Paris
France
Dominique Goux
National Institute of Statistics and Economic Studies (INSEE) ( email )
18, Boulevard Adolphe-Pinard
75675 Paris Cedex 14
France
+33 1 41 17 60 2 (Phone)
+33 1 41 17 60 4 (Fax)
Andre Zylberberg
National Center for Scientific Research (CNRS) ( email )
75013 Paris, 94204
France
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