Efficient Bargaining and the Skill-Structure of Wages and Employment

Center of Finance and Econometrics, CoFE Discussion Paper No. 00-24

23 Pages Posted: 12 Aug 2006

See all articles by Winfried Pohlmeier

Winfried Pohlmeier

University of Konstanz - Department of Economics & Center of Finance & Econometrics (CoFE)

Ulrich Kaiser

University of Southern Denmark - Faculty of Social Sciences; Center for Economic and Business Research (CEBR); Centre for European Economic Research

Date Written: August 2000

Abstract

This paper presents structural estimates for a bargaining model which nests the right-to-manage, the efficient wage bargaining, the seniority and the standard neoclassical labor demand model as special cases. In contrast to most existing models, our approach accounts for heterogeneous skill groups which differ in terms of productivity and representation in the bargaining process through union preferences. The paper introduces the concept of "virtual" firms which allows us to (i) test the efficient contract model against models implying that firms operate on the labor demand curve and to (i) overcome a potential misspecification of firms' output markets. Estimates of structural parameters are obtained from a novel cross-section of German firms of the business related service sector which includes information on skill-specific wage rates at the firm level. Central results of this paper are that unions do care about both wages and employment in the bargaining process and that firms operate on the contract curve. The bargaining power of unions in East Germany turns out to be much weaker than in West Germany.

Keywords: efficient bargaining, skill-structure of employment, business-related services, GMM

JEL Classification: L8, C22, C25, G10

Suggested Citation

Pohlmeier, Winfried and Kaiser, Ulrich, Efficient Bargaining and the Skill-Structure of Wages and Employment (August 2000). Center of Finance and Econometrics, CoFE Discussion Paper No. 00-24. Available at SSRN: https://ssrn.com/abstract=923765 or http://dx.doi.org/10.2139/ssrn.923765

Winfried Pohlmeier (Contact Author)

University of Konstanz - Department of Economics & Center of Finance & Econometrics (CoFE) ( email )

Konstanz, D-78457
Germany

HOME PAGE: http://econometrics.wiwi.uni-konstanz.de

Ulrich Kaiser

University of Southern Denmark - Faculty of Social Sciences ( email )

Campusvej 55
DK-5230 Odense M
Denmark

HOME PAGE: http://www.sam.sdu.dk/staff/uka

Center for Economic and Business Research (CEBR) ( email )

Porcelaenshaven, Bldg 65
DK-2000 Frederiksberg
Denmark

HOME PAGE: http://www.cebr.dk/uk

Centre for European Economic Research ( email )

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

HOME PAGE: http://www.zew.de/de/mitarbeiter/mitarbeiter.php3?action=mita&kurz=uka

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