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Title:Preferences for collective versus individualised wage setting PDF Logo
Authors:Boeri, Tito
Burda, Michael C.
Issue Date:2008
Series/Report no.:IZA Discussion Papers 3365
Abstract:Standard models of equilibrium unemployment assume exogenous labour market institutions and flexible wage determination. This paper models wage rigidity and collective bargaining endogenously, when workers differ by observable skill and may adopt either individualized or collective wage bargaining. In the calibrated model, a substantial fraction of workers and firms as well as the median voter prefer collective bargaining to the decentralised regime. A fundamental distortion of the separation decision represented by employment protection (a firing tax) is necessary for such preferences to emerge. Endogenizing collective bargaining can significantly modify comparative statics effects of policy arising in a single-regime setting.
Subjects:Wage rigidity
employment protection
equilibrium unemployment
JEL:J5
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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