Real Wage Determinatioan in Collective Bargaining Agreements

28 Pages Posted: 15 Jun 2001 Last revised: 19 Sep 2010

See all articles by Louis N. Christofides

Louis N. Christofides

University of Cyprus - Department of Economics; University of Guelph; CESifo (Center for Economic Studies and Ifo Institute for Economic Research); IZA Institute of Labor Economics

Andrew J. Oswald

University of Warwick - Department of Economics; IZA Institute of Labor Economics

Date Written: November 1989

Abstract

This paper studies the determinants of real wage rates using data on Canadian labour contracts signed between 1978 and 1984. Its results are consistent with Dunlop's neglected (1944) hypothesis that real pay movements are shaped by product price changes (contrary to the predictions of implicit contract theory and other models of wage inflexibility). The level of the unemployment rate is found to lower the real wage level with an elasticity between -0.04 and -0.13, whereas a Phillips Curve specification which relates wage changes to the level of the unemployment rate is not convincingly supported by the data. These results may be seen as consistent with the view that collective bargaining is a form of rent-sharing in which external unemployment weakens workers' bargaining strength.

Suggested Citation

Christofides, Louis N. and Oswald, Andrew J., Real Wage Determinatioan in Collective Bargaining Agreements (November 1989). NBER Working Paper No. w3188. Available at SSRN: https://ssrn.com/abstract=273580

Louis N. Christofides (Contact Author)

University of Cyprus - Department of Economics ( email )

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CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

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IZA Institute of Labor Economics

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Andrew J. Oswald

University of Warwick - Department of Economics ( email )

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United Kingdom
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IZA Institute of Labor Economics

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Bonn, D-53072
Germany

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