8. Collective bargaining and wage dispersion

Building on research done within the PIEP project, the research team intends to investigates various aspects of wage formation, collective bargaining and industrial relations practices. In particular, collective bargaining can affect both the overall level and the dispersion of wages. Whilst linked, the research literature has treated these two effects separately. A large body of empirical research has analysed the effects of wage bargaining institutions on the overall level of wages and the macroeconomic performance of the labour market, measured in terms of unemployment and employment rates. A somewhat different body of literature has focused on the effects of bargaining institutions on wage inequalities. With this respect, the empirical findings tend to show that unions reduce wage inequalities and that this compression effect is stronger where union membership and bargaining coverage are high, together with high levels of centralisation and/or co-ordination of collective bargaining.

In recent decades many countries have decided to reform their wage setting institutions, and one feature of this change has been the decentralisation of collective bargaining to overcome the rigid arrangements imposed by centralised bargaining, and to give firms more leeway in adjusting to local labour market conditions and to their needs in terms of productive efficiency. For example, in a number of Continental European countries, such as Italy, Belgium, and Spain, coordination, unionism, coverage of collective bargaining, and other wage-setting institutions have not changed in a radical way; however, these countries are characterised by a multi-level system of bargaining where SEB has developed alongside MEB. At least in principle, this form of decentralisation has been adopted with the idea of combining the benefits of some degree of centralisation and/or coordination in terms of internalisation of various effects of wage negotiations with the benefits of greater relative-wage flexibility.

The questions raised by this scenario are several both concerning the structure of collective bargaining -- i.e. the presence of SEB (at the firm or establishment level) in addition to MEB (national, regional, provincial or whatever) in countries where MEB plays the role of default--, as well as the compression of wages between and within establishments. In principle, different and opposing effects on the wage distribution can occur and, thus, the answer is an empirical matter. The aim of the research project is to analyse the impact of these different institutional settings on pay structure and pay dispersion in European countries for which ESES data are available. The analysis will be carried out using both 1995 and 2002 ESES datasets, in order to study also the changes in the role of wage bargaining that potentially have taken place between the two different years.

PI: Carlo dell'Aringa

Prof. Claudio Lucifora, Prof. Lorenzo Cappellari, Prof. Laura Pagani, Prof. Giulio Piccirilli, Dr. Paolo Ghinetti, Dr. Elena Cottini, Dr. Nicola Orlando, Dr. Dario Pozzoli