The Effect of Firm- and Industry-Level Contracts on Wages - Evidence from Longitudinal Linked Employer-Employee Data

47 Pages Posted: 10 Jan 2007 Last revised: 26 Aug 2008

See all articles by Nicole Gürtzgen

Nicole Gürtzgen

ZEW – Leibniz Centre for European Economic Research

Date Written: 2006

Abstract

Using a large linked employer-employee data set, this paper presents new evidence on the collective bargaining wage effect in western and eastern Germany. The novel feature of our analysis is that we use a longitudinal data set. Thus, in contrast to previous studies, we seek to assess the extent to which differences in wages between workers in covered and uncovered firms really represent an effect of collective bargaining coverage, rather than a consequence of the non-random selection of workers and firms into the different regimes. By measuring the relative wage gains or losses of workers employed in firms that change contract status, we obtain estimates that depart considerably from previous results relying on cross-sectional data. Industry-level contracts in western Germany and firm-level contracts in eastern Germany are associated with a small, but statistically significant average wage premium of about 2 percent. Moreover, wage decompositions indicate that the overall effect of collective bargaining coverage on the returns to observable attributes appears to be negligible once the selection into the regimes is accounted for.

Keywords: Union Wage Premium, Collective Bargaining Coverage

JEL Classification: J31, J51

Suggested Citation

Guertzgen, Nicole, The Effect of Firm- and Industry-Level Contracts on Wages - Evidence from Longitudinal Linked Employer-Employee Data (2006). ZEW - Centre for European Economic Research Discussion Paper No. 06-082, Available at SSRN: https://ssrn.com/abstract=955753 or http://dx.doi.org/10.2139/ssrn.955753

Nicole Guertzgen (Contact Author)

ZEW – Leibniz Centre for European Economic Research ( email )

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

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