Collective Wage Contracts, Opt‐Out Clauses, and Firm Wage Differentials: Evidence from Linked Employer-Employee Data
18 Pages Posted: 23 Jun 2012
Date Written: July 2012
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: Suggested Citation