Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/315954 
Year of Publication: 
2025
Series/Report no.: 
Upjohn Institute Working Paper No. 25-413
Publisher: 
W.E. Upjohn Institute for Employment Research, Kalamazoo, MI
Abstract: 
We use novel surveys of firms and workers, linked to administrative employer-employee data, to study the prevalence and importance of individual bargaining in wage determination. We show that simple survey questions accurately elicit firms' bargaining strategies. Using the elicited strategies for 772 German firms, we document that the majority of firms are willing to engage in individual wage bargaining. Labor market factors predict firms' strategies better than firm characteristics. Survey responses from nearly 10,000 full-time workers indicate that most worker-firm interactions begin with the worker rejecting the offer and remaining at the incumbent firm. There is substantial heterogeneity in workers' bargaining behavior, which translates into within-firm wage inequality. Firms that set pay via individual bargaining have a 3 percentage point higher gender wage gap.
Subjects: 
wage bargaining
employer-employee
Germany
wage inequality
gender wage gap
JEL: 
D83
J31
J41
J53
L21
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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