WHY FOREIGN OWNERSHIP MAY BE GOOD FOR YOU*

We develop a two‐country model with heterogeneous producers and rent‐sharing at the firm level. We identify two sources of a multinational wage premium: A composition effect because multinational firms are more productive, make higher profits, and pay higher wages, and a firm‐level wage effect, because a firm makes higher global profits and thus pays higher wages in its home market when becoming multinational. With two identical countries, the wage premium is fully explained by firm characteristics. Allowing for technology differences between countries, a residual wage premium exists in the technologically backward country but not in the advanced country.     

On-the-job search and strategic bargaining

This paper studies wage bargaining in a simple economy in which both employed and unemployed workers search for better jobs. The axiomatic Nash bargaining solution and standard strategic bargaining solutions are inapplicable because the set of feasible payoffs is nonconvex. I instead develop a strategic model of wage bargaining between a single worker and firm that is applicable to such an environment. I show that if workers and firms are homogeneous, there are market equilibria with a continuous wage distribution in which identical firms bargain to different wages, each of which is a subgame perfect equilibrium of the bargaining game. If firms are heterogeneous, I characterize market equilibria in which more productive firms pay higher wages. I compare the quantitative predictions of this model with Burdett and Mortensen's [1998. Wage differentials, employer size and unemployment. International Economic Review 39, 257-273.] wage posting model and argue that the bargaining model is theoretically more appealing along important dimensions.     

Trade and unions: Does size matter?

Our empirical analysis builds upon the hypothesis that unions are detrimental to a firm's efficiency. Using a rich survey of German manufacturers, we investigate firm-level determinants on the probability of collective wage bargaining with particular focus on the impact of a firm's engagement in foreign markets. An interesting and very robust finding is that exporters are less likely to engage in union wage bargaining. This finding is in line with a pessimistic perception of unions. The negative effect of collective bargaining can be offset by efficiency gains for larger exporters, who can benefit from operation cost saving effects. Size does matter as larger firms export and may find bargaining with a single entity representing the workforce more convenient than bargaining with each worker individually. We are using firm level information on IT investment as instrument for the export dummy and successfully test for the validity of this instrument.     

UNION–FIRM BARGAINING AGENDA REVISITED: WHEN UNIONS HAVE DISTINCT PREFERENCES

In this paper we revisit the issue of the scope of bargaining between firms and unions by considering a more general union's utility function with distinct preferences and sequential negotiations. First, we compare exogenously given labour market institutions; i.e., right‐to‐manage (RTM) and sequential efficient bargaining (SEB). We show that the conventional wisdom, which states that firms always prefer RTM, no longer holds. In fact, when unions are adequately wage aggressive and have strong enough bargaining power, firms may prefer SEB negotiations; however, firms switch their preference to RTM when unions are very strong. Moreover, we show that a conflict of interest between the parties may emerge when unions are sufficiently employment oriented as well as sufficiently wage aggressive and not too strong or too weak in bargaining. Second, we analyse the endogenous choice of the bargaining agenda. We show that a rich plethora of equilibria may occur and new situations of conflict/agreement of interests between the bargaining parties arise in particular when unions are sufficiently wage‐aggressive.     

Foreign ownership wage premia in emerging economies

In this article we examine the relationship between wages, labour productivity and ownership using a linked employer–employee dataset covering a large fraction of the Czech labour market in 2006. We distinguish between different origins of ownership and study wage and productivity differences. The raw wage differential between foreign and domestically‐owned firms is about 23 percent. The empirical analysis is carried out on both firm‐ and individual‐level data. A key finding is that industry, region and notably human capital explain only a small part of the foreign–domestic ownership wage differential. Both white and blue collar workers as well as skilled and unskilled employees obtain a foreign ownership wage premium. Foreign ownership premia are more prevalent in older and less technologically advanced firms. Joint estimation of productivity and wage equations show that, controlling for human capital, the difference in productivity is about twice as large as the wage differential. Overall, results indicate that the international firms share their rents with their employees.     

The Exporter Wage Premium Reconsidered—Destinations,Distances and Linked Employer–Employee Data

This study uses detailed, reliable and up‐to‐date linked employer–employee data that take account of both the demand and the supply side of the labor market to challenge the conventional wisdom of a universal exporter wage premium. It investigates whether for German establishments an exporter wage premium can be found irrespective of export destination and the distance between export origin and destination. As expected, it finds that exporters generally pay higher wages than non‐exporters, but it also shows that only exporting to certain countries is associated with a wage premium. Moreover, such a premium exists only for establishments that ship goods over a relatively long distance.     

A contribution to the public–private wage inequality debate

This paper studies the public–private wage inequality in Romania. Although public sector employment is perceived as safer and offering more benefits, we find that in Romania it also offers higher wages, after controlling for experience, education and gender. This result is at odds with the negative premium uncovered in other transition economies. The public–private wage premium is increasing across the wage distribution, leading to more inequality in the public sector. Decomposing the wage premium into the effect of personal characteristics, coefficients and residuals, we show that only about half of this premium can be attributed to personal characteristics, especially in the top half of the wage distribution. We also find that the number of other public sector employees in the family is a significant driver of public sector employment, facilitating access to jobs. However, the effects of self‐selection are negligible, the premium being still positive and significant after controlling for this.     

The Impact of Exporting and Export Destination on Manufacturing Wages: Evidence for Sub-Saharan Africa

This paper investigates wage effects of trade status of African firms. Using data for manufacturing firms, we find a positive overall association between individual earnings and export status. Moreover, the skill wage premium in exporting firms is significantly higher. These results are consistent with either trade inducing higher wages in the exporting country, or with more productive (higher wage) firms self‐selecting into exporting. The results are not robust, however, to disaggregation by export destination. Exporting to outside Africa generates a negative wage premium whereas exporting to African markets yields a positive premium in export firms of the exporting country. This suggests that there is a disciplining effect on the wages of exporting firms only when exporting is to more competitive markets.     

The Impact of Unionization Structures with Heterogeneous Firms and Rent‐Sharing Motives

How are unemployment and output affected if wages are set on the sector level rather than firm level? We take a new look at this question, allowing for heterogeneous firms and rent‐sharing motives. Without these motives, employment and output are lower under sector‐level wage‐setting due to higher wage markups. With rent‐sharing motives, however, firm selection is higher under sector‐level wage‐setting, which tends to increase employment and output, thus counteracting the markup effect. Simulations show that the firm‐selection effect decreases the difference between the two unionization structures substantially but it does not change the signs of the effects on output and employment.     

Micro Foundations for Wage Flexibility: Wage Insurance at the Firm Level*

To what extent do firms insulate their workers' wages from fluctuations in product markets? Which firm and worker attributes are associated with wage flexibility at the micro level? We first rely on Guiso, Pistaferri and Schivardi (2005) to estimate dynamic models of sales and wages, finding that in Portugal, workers' wages respond to permanent shocks on firm performance, as opposed to transitory shocks. We then explore the factors associated with wage flexibility, finding that collective bargaining and minimum wages are associated with higher wage insurance by the firm, while the threat of firm bankruptcy reduces it. Managers receive less protection against permanent shocks than other workers.     

A Note on Franchising and Wage Bargaining

A franchising contract relocates distributable rent between franchisor and franchisee. With decentralized wage bargaining relocation modifies the position of the union in the wage bargaining. If the rent is relocated to the franchisor completely, then even a strong union is not able to raise wage above reservation level in the franchisee's firm. If franchisor and franchisee negotiate on rent division, there is an incentive to increase the franchise fee at the expense of the union. Therefore the overall rent assigned to labor depends on the differences of labor intensity in the franchisor's and franchisee's firms. Firm owners may be able to transfer distributable rents from a firm with a strong union to one with a weak union. Furthermore, a franchising contract shows a first mover advantage. A franchising contract is placed before wage bargaining, benefiting the franchisor.     

Unionization,international integration,and selection

Abstract We study how unionization affects competitive selection between heterogeneous firms when wage negotiations can occur at the firm or at the profit‐centre level. With productivity specific wages, an increase in union power has: (i) a selection‐softening; (ii) a counter‐competitive; (iii) a wage‐inequality; and (iv) a variety effect. In a two‐country asymmetric setting, stronger unions soften competition for domestic firms and toughen it for exporters. With profit‐centre bargaining, we show how trade liberalization can affect wage inequality among identical workers both across firms (via its effects on competitive selection) and within firms (via wage discrimination across destination markets).     

Optimal tax progressivity in unionised labour markets: What are the driving forces?

In labour markets with collective wage bargaining higher progressivity of the labour income tax creates a trade-off. On the one hand, wages are lowered and unemployment decreases, on the other hand, the individual labour supply decision is distorted at the hours-of-work margin. The optimal level of tax progressivity within this trade-off is determined using a numerical general equilibrium model with imperfect competition on the goods market, collective wage bargaining and a labour-supply module calibrated to empirically plausible elasticity values. The model is calibrated to macroeconomic and institutional parameters of both the OECD average and a number of individual OECD countries. In most cases the optimal degree of tax progressivity is below the actual level. A decomposition approach shows that the optimal level is increased by high unemployment and by the general tax level.     

THE RELATIONSHIP BETWEEN EXPORT STATUS AND PRODUCTIVITY IN SERVICES: A FIRM‐LEVEL ANALYSIS FOR SPAIN

This paper analyses the relationship between export status and productivity in a major service exporter, Spain, during 2001–07. I find that exporters in the services sector are 45 percent more productive than non‐exporters. This productivity premium is larger for firms that supply non‐internet‐related services than for firms that supply internet‐related services. The results show that exporters were more productive than non‐exporters before beginning to export, and also that exporting increases productivity growth; however, this positive shock vanishes quickly.     

Determinants of wage stickiness in a developing economy

We explore wage flexibility in a developing country and compare our results to what has been found in similar studies using European data. In particular, we conduct a survey of 1189 firms in Pakistan to analyze the determinants of wage rigidity. We find that the existence of competitive wages and an interaction with the informal economy are statistically significant determinants of wage stickiness. While the role of competitive wages is similar to what has been found in studies of European firms, the latter find a much larger role for turnover, collective bargaining and employment protection. In contrast, in Pakistan we find that firms hiring from the informal sector are significantly more flexible in changing their wages. This suggests that the informal sector adds to the wage flexibility of the formal sector.     

The Macroeconomic Consequences of Reciprocity in Labor Relations*

We develop and analyze a structural model of efficiency wages founded on reciprocity. Workers are assumed to face an explicit trade‐off between the disutility of providing effort and the psychological benefit of reciprocating the gift of a wage offer above some reference level. The model provides a rationale for rent sharing—a feature that is very much present in the data but absent from previous formulations of the efficiency wage hypothesis. This firm‐internal perspective on efficiency wages has potentially important macroeconomic consequences: rent‐sharing considerations promote wage rigidity, internal amplification and differential responses to technology and demand shocks.     

Who values the family‐friendly aspects of a job? Evidence from the Japanese labour market

Women with family responsibilities such as child‐rearing generally prefer jobs with flexible working conditions. According to the theory of compensating wage differentials, women working in such family‐friendly jobs are paid less than those working in family‐unfriendly jobs. The present paper investigates whose wages are more greatly affected by the family‐(un)friendly aspects of their jobs. Based on a longitudinal survey of Japanese women, we found that among several family‐(un)friendly attributes of a job, only commuting time requires a wage premium, and most of the premium is associated with job changes made by part‐time‐working married women.     

效率工资、租金分享与企业工资收入差距——基于第一次全国经济普查工业企业数据的实证研究

企业利润对工资差距的影响究竟来自效率工资还是来自租金分享,这是理论界和政策制定者共同关心的问题。文章利用2004年第一次全国经济普查数据实证分析发现:(1)企业利润是解释我国企业工资差距的重要因素,这主要由效率工资导致。(2)国有企业存在租金共享,但它不是通过企业利润实现的,而是利用行业垄断地位直接将职工高工资转化为企业成本实现的。(3)集体企业存在着租金共享。(4)外资企业也存在租金共享,但存在租金共享的外资企业同时具有更高的效率。(5)私营企业存在效率工资。与其他所有制企业不同的是,对私营企业而言,行业垄断不但不能提高反而会降低职工工资水平,或反过来说,产品市场竞争有利于提高职工工资水平。最后,文章针对性地给出了一些缩小企业工资差距的政策建议。     

The Rise and Fall of Centralized Wage Bargaining

During the three decades spanning the early 1950s to the early 1980s, the wage‐setting process in most Northern European countries was dominated by centralized bargaining (i.e., peak‐level labor and employer associations set wages nationwide). In the early 1980s, centralized wage bargaining began to collapse. In this paper, we assess a novel explanation for both the initial establishment of a centralized wage‐setting process, and its subsequent collapse. According to our theory, centralized wage bargaining was set up as a response to the spillovers created by the unemployment benefit program. Its collapse was the result of the increase in the productivity gap across workers, brought about by equipment‐specific technological progress and equipment–skill complementarity.     

Unobserved Individual and Firm Heterogeneity in Wage and Job‐Duration Functions: Evidence from German Linked Employer–Employee Data

Abstract. We analyse the correlations between individual and firm fixed effects, and wage and job‐duration functions. Our results for large firms suggest that low‐wage firms tend to be stable firms, suggesting that lower wages can buy job stability. Furthermore, high‐wage workers sort into the stable low‐wage firms. Our interpretation is that high‐wage workers have a higher wage to insure against job loss and can afford more easily to forgo wages in favour of job stability. This may provide an explanation of the puzzle identified in previous literature that high‐wage workers are matched to low‐wage firms.