On the Role of Sectoral and National Components in the Wage Bargaining Process

30 Pages Posted: 3 May 2010

See all articles by Christian Dreger

Christian Dreger

European University Viadrina Frankfurt (Oder); IZA Institute of Labor Economics; Chinese Academy of Social Sciences (CASS)

Hans-Eggert Reimers

Hochschule Wismar


This paper provides an empirical analysis on the determination of wages at the sectoral level in main industrial economies. Nominal wages are bargained between labour unions and employers in imperfect competitive markets, where spillovers across sectors might occur. Using a principal component approach, sectoral wage growth rates are separated into common and idiosyncratic components. This defines the relative role of national and sector specific conditions in the wage determination process. The common component is highly relevant especially in continental Europe, and is more visible for manufacturing than for services sectors. It reflects national inflation and productivity growth, while labour market tightness is negligible. The weight of the macroeconomic environment has declined in recent years. Wage growth tends to be more in line with idiosyncratic conditions like sectoral productivity and prices, probably due to the ongoing globalization of markets.

Keywords: sectoral wages, wage spillovers, common factors

JEL Classification: C22, C23, E24

Suggested Citation

Dreger, Christian and Reimers, Hans-Eggert, On the Role of Sectoral and National Components in the Wage Bargaining Process. IZA Discussion Paper No. 4908, Available at SSRN: https://ssrn.com/abstract=1599006 or http://dx.doi.org/10.2139/ssrn.1599006

Christian Dreger (Contact Author)

European University Viadrina Frankfurt (Oder) ( email )

Frankfurt (Oder)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072

Chinese Academy of Social Sciences (CASS) ( email )

Beijing, 100732

Hans-Eggert Reimers

Hochschule Wismar ( email )

FB Wirtschaft
Philipp-Mueller-Str. PF 1210
23952 Wismar
49-3841-753-601 (Phone)
49-3841-753-383 (Fax)

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