Union Decline and the Coverage Wage Gap in Germany

41 Pages Posted: 28 Jun 2014

See all articles by John T. Addison

John T. Addison

University of South Carolina - Moore School of Business - Department of Economics; IZA Institute of Labor Economics

Paulino Teixeira

Universidade de Coimbra - Faculdade de Economia; Center for European Economic Research (ZEW)

Jens Stephani

Government of the Federal Republic of Germany - Institute for Employment Research (IAB)

Lutz Bellmann

Institute for Employment Research (IAB); Institute for the Study of Labor (IZA)

Abstract

Using linked employer-employee data, this paper estimates the effect of collective bargaining coverage on wages over an interval of continuing decline in unionism. Unobserved firm and worker heterogeneity is dealt with using two establishment sub-samples, comprising collective bargaining joiners and never members on the one hand and collective bargaining leavers and always members on the other, each in combination with subsets of worker job stayers. The counterfactuals are then reversed for robustness checks. Joining a sectoral agreement is found always to produce higher wages, while exiting a sectoral agreement no longer produces wage losses if the transition is to a firm agreement. Leaving a firm agreement to non-coverage also leads to wage reductions, while joining one from non-coverage seems decreasingly favourable. The reverse counterfactuals yield correspondingly smaller estimates (in absolute value) of wage development than reported for the initial counterfactuals. Finally, although small, the union wage gap persists.

Keywords: Germany, sectoral collective bargaining, firm-level agreements, wages, spell fixed-effects

JEL Classification: J31, J51, J53

Suggested Citation

Addison, John T. and Teixeira, Paulino and Stephani, Jens and Bellmann, Lutz, Union Decline and the Coverage Wage Gap in Germany. IZA Discussion Paper No. 8257. Available at SSRN: https://ssrn.com/abstract=2460160

John T. Addison (Contact Author)

University of South Carolina - Moore School of Business - Department of Economics ( email )

The Francis M. Hipp Building
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HOME PAGE: http://mooreschool.sc.edu/moore/economics/profiles/addison.htm

IZA Institute of Labor Economics

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

Paulino Teixeira

Universidade de Coimbra - Faculdade de Economia ( email )

Av. Dias da Silva, 165
Coimbra, 3004-512
Portugal

Center for European Economic Research (ZEW) ( email )

P.O. Box 10 34 43
L 7,1 D-68161 Mannheim
Germany

Jens Stephani

Government of the Federal Republic of Germany - Institute for Employment Research (IAB) ( email )

Regensburger Str. 104
Nuremberg, 90478
Germany

Lutz Bellmann

Institute for Employment Research (IAB) ( email )

Regensburger Str. 104
Nuremberg, 90478
Germany
+49 911 179 3046 (Phone)
+49 911 179 3297 (Fax)

Institute for the Study of Labor (IZA)

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

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