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Organised Labour, Labour Market Imperfections, and Employer Wage Premia
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Organised Labour, Labour Market Imperfections, and Employer Wage Premia

Author

Listed:
  • Sabien Dobbelaere

    (rije Universiteit Amsterdam, Tinbergen Institute, IZA Institute of Labor Economics, The Netherlands)

  • Boris Hirsch

    (Leuphana University of Lüneburg)

  • Steffen Mueller

    (Halle Institute for Economic Research (IWH), University of Magdeburg)

  • Georg Neuschaeffer

    (Halle Institute for Economic Research (IWH))

Abstract

This paper examines how collective bargaining through unions and workplace codetermination through works councils shape labour market imperfections and how labour market imperfections matter for employer wage premia. Based on representative German plant data for the years 1999-2016, we document that labour market imperfections are the norm rather than the exception. Wage mark-downs, that is wages below the marginal revenue product of labour rooted in employers' monopsony power, are the most prevalent outcome. We further find that both types of organised labour are accompanied by a smaller prevalence and intensity of wage mark-downs whereas the opposite holds for wage mark-ups, that is wages above the marginal revenue product of labour rooted in workers' monopoly power. Finally, we document a close link between our production-based labour market imperfection measures and employer wage premia. The prevalence and intensity of wage mark-downs are associated with a smaller level and larger dispersion of premia whereas wage mark-ups are only accompanied by a higher premium level.

Suggested Citation

  • Sabien Dobbelaere & Boris Hirsch & Steffen Mueller & Georg Neuschaeffer, 2020. "Organised Labour, Labour Market Imperfections, and Employer Wage Premia," Working Paper Series in Economics 396, University of Lüneburg, Institute of Economics.
    • Handle: RePEc:lue:wpaper:396
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    2. Mertens, Matthias, 2022. "Micro-mechanisms behind declining labor shares: Rising market power and changing modes of production," International Journal of Industrial Organization, Elsevier, vol. 81(C).
    3. Steffen Mueller & Georg Neuschaeffer, 2021. "Worker Participation in Decision‐making, Worker Sorting, and Firm Performance," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 60(4), pages 436-478, October.

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    More about this item

    Keywords

    Wage mark-downs; wage mark-ups; collective wage agreements; works councils; employer wage premia;
    All these keywords.

    JEL classification:

    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis

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