Equalizing Wage Differences and Bargaining Power: Evidence from a Panel of French Firms

39 Pages Posted: 21 Oct 2002

See all articles by Pierre Cahuc

Pierre Cahuc

National Institute of Statistics and Economic Studies (INSEE) - National School for Statistical and Economic Administration (ENSAE); Université Paris I Panthéon-Sorbonne - Equipe Universitaire de Recherche en Economie Quantitative (EUREQUA); University of Angers - French National Center for Scientific Research (CNRS); Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Christian Gianella

Ministry of the Economy, Finance and Industry (MINEFI) - Direction de la Prevision

Dominique Goux

National Institute of Statistics and Economic Studies (INSEE)

Andre Zylberberg

National Center for Scientific Research (CNRS)

Multiple version iconThere are 2 versions of this paper

Date Written: September 2002

Abstract

In this paper, we develop a dynamic model of firm-level bargaining, along the lines of Manning (1993). In this context, we provide a firm level wage equation that explicitly accounts for firm heterogeneity. This wage equation explains inter-firm wage differentials by differences in labour productivity and job turnover. More precisely, our model predicts that the higher the rate of job destruction within one firm, the higher the compensation of workers. We estimate our wage equation using matched employer-employee panel data in the manufacturing sector, where firms are tracked for five years, between 1988 and 1992. The empirical estimates, using GMM techniques, are fully consistent with our theoretical prediction of equalizing differences: workers who take into account their intertemporal discounted income will support lower wages when they benefit from lower unemployment risks within their firm. In our model, wages are set to maximize a Nash bargain criterion, and according to the estimators used or the industry we consider, we show that workers have an average bargaining power between 0.15 and 0.25, measured on a scale going from 0 to 1.

Keywords: Collective Bargaining, Equalizing Wage Differences

JEL Classification: J33, J51

Suggested Citation

Cahuc, Pierre and Gianella, Christian and Goux, Dominique and Zylberberg, Andre, Equalizing Wage Differences and Bargaining Power: Evidence from a Panel of French Firms (September 2002). IZA Discussion Paper No. 582. Available at SSRN: https://ssrn.com/abstract=340303

Pierre Cahuc (Contact Author)

National Institute of Statistics and Economic Studies (INSEE) - National School for Statistical and Economic Administration (ENSAE) ( email )

92245 Malakoff Cedex
France

Université Paris I Panthéon-Sorbonne - Equipe Universitaire de Recherche en Economie Quantitative (EUREQUA) ( email )

106-112 Boulevard de l'Hopital
Paris Cedex 13, 75647
France
+33 1 4117 3717 (Phone)
+33 1 4117 3724 (Fax)

HOME PAGE: http://eurequa.univ-paris1.fr/membres/cahuc/

University of Angers - French National Center for Scientific Research (CNRS)

106-112 Boulevard de l'Hopital
75647 Paris Cedex 13
France
+33 4 44 07 82 06 (Phone)
+33 4 44 07 82 02 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

IZA Institute of Labor Economics

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

Christian Gianella

Ministry of the Economy, Finance and Industry (MINEFI) - Direction de la Prevision ( email )

139 rue de Bercy
75012 Paris
France

Dominique Goux

National Institute of Statistics and Economic Studies (INSEE) ( email )

18, Boulevard Adolphe-Pinard
75675 Paris Cedex 14
France
+33 1 41 17 60 2 (Phone)
+33 1 41 17 60 4 (Fax)

Andre Zylberberg

National Center for Scientific Research (CNRS) ( email )

3, rue Michel-Ange
Paris cedex 16, 75794
France

Register to save articles to
your library

Register

Paper statistics

Downloads
93
Abstract Views
1,454
rank
243,608
PlumX Metrics