The Rise and Fall of Centralized Wage Bargaining |
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| Authors: | Salvador Ortigueira |
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| Institution: | Department of Economics, Universidad Carlos III de Madrid, , 28903 Getafe, SpainI am grateful to seminar participants at the European University Institute, the EU Institute in Tokyo, and at the Universities of Arizona State, Bilbao, Cornell, Humboldt‐Berlin, Osaka, Penn State, Pennsylvania, St Andrews, and Southampton. Financial support from the Spanish Ministerio de Ciencia e Innovación under grant 2011/00049/001 is gratefully acknowledged. |
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| Abstract: | 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. |
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| Keywords: | Equipment– skill complementarity equipment‐specific technological progress unemployment benefits wage‐bargaining arrangements J31 J41 J51 |
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