The Institutional Context of an ‘Empirical Law’: The Wage Curve Under Different Regimes of Collective Bargaining

21 Pages Posted: 26 Feb 2013

See all articles by Uwe Blien

Uwe Blien

Institute for Employment Research (IAB); IZA Institute of Labor Economics

Wolfgang Dauth

Institute for Employment Research (IAB)

Thorsten Schank

Johannes Gutenberg University Mainz

Claus Schnabel

University of Erlangen-Nuremberg; IZA Institute of Labor Economics

Date Written: March 2013

Abstract

The wage curve postulates that the wage level is a decreasing function of the regional unemployment rate. In testing this hypothesis, most studies have not taken into account that differences in the institutional framework may have an impact on the existence (or the slope) of a wage curve. Using a large‐scale linked employer – employee dataset for Western Germany, this article provides a first direct test of the relevance of different bargaining regimes (and of works councils) for the existence of a wage curve. In pooled regressions for the period 1998 to 2006, as well as in worker‐level or plant‐level fixed‐effects estimations, we obtain evidence for a wage curve for plants with a collective bargaining agreement at firm level. The point estimates for this group of plants are close to the −0.1 elasticity of wages with respect to unemployment postulated by Blanchflower and Oswald. In this regime, we also find that works councils dampen the adjustment of wages to the regional unemployment situation. In the other regimes of plants that either do not make use of collective contracts or apply sectoral agreements, we do not find a wage curve.

Suggested Citation

Blien, Uwe and Dauth, Wolfgang and Schank, Thorsten and Schnabel, Claus, The Institutional Context of an ‘Empirical Law’: The Wage Curve Under Different Regimes of Collective Bargaining (March 2013). British Journal of Industrial Relations, Vol. 51, Issue 1, pp. 59-79, 2013. Available at SSRN: https://ssrn.com/abstract=2224436 or http://dx.doi.org/10.1111/j.1467-8543.2011.00883.x

Uwe Blien (Contact Author)

Institute for Employment Research (IAB) ( email )

Regensburger Str. 104
Nuremberg, 90478
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Wolfgang Dauth

Institute for Employment Research (IAB) ( email )

Regensburger Str. 104
Nuremberg, 90478
Germany

HOME PAGE: http://www.iab.de/en/ueberblick/mitarbeiter.aspx/Mitarbeiter/603

Thorsten Schank

Johannes Gutenberg University Mainz ( email )

Claus Schnabel

University of Erlangen-Nuremberg ( email )

Institut für Wirtschaftsforschung
Lange Gasse 20
D-90403 Nuernberg
Germany
+49 911 5302 330 (Phone)
+49 911 5302 721 (Fax)

HOME PAGE: http://https://www.arbeitsmarkt.rw.fau.de/english-version/staff/prof-dr-claus-schnabel/

IZA Institute of Labor Economics

Schaumburg-Lippe-Str. 7 / 9
Bonn, D-53072
Germany

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