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Title:Bargained Wages, Wage Drift and the Design of the Wage Setting System PDF Logo
Authors:Cardoso, Ana Rute
Portugal, Pedro
Issue Date:2003
Series/Report no.:IZA Discussion paper series 914
Abstract:This paper aims at answering the question: How does a typically 'European' bargaining system - with collective bargaining, extension mechanisms and national minimum wage - coexist with low unemployment rate and high wage flexibility? A unique data set on workers, firms and collective bargaining contracts in the Portuguese economy is used to analyze the determinants of both the bargained wage and the wage drift. Results indicate that wage drift stretches the returns to every worker and firm attribute, whereas it shrinks the returns to union bargaining power. Therefore, firm-specific arrangements, in the form of wage drift, partly offset collective bargaining, granting firms a high degree of freedom when setting wages. Union bargaining power raises the overall wage level, but lowers the returns on worker attributes, an outcome of the egalitarian policy pursued.
Subjects:wage distribution
wage drift
union bargaining power
employer coordination
JEL:J51
J31
D21
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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