Wage Dispersion and Decentralization of Wage Bargaining
40 Pages Posted: 3 Sep 2009
Date Written: September 2, 2009
This paper studies how decentralization of wage bargaining from sector to firm level influences wage levels and wage dispersion. We use a detailed panel data set covering a period of decentralization in the Danish labor market. The decentralization process provides exogenous variation in the individual worker's wage-setting system that facilitates identification of the effects of decentralization. Consistent with predictions we find that wages are more dispersed under firm-level bargaining compared to more centralized wage-setting systems. However, the differences across wage-setting systems are reduced substantially when controlling for unobserved individual level heterogeneity.
Keywords: wage bargaining, decentralization, panel data quantile regression
JEL Classification: J31, J51, C23
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