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Collective bargaining and spillovers in local labor markets

Bassier, Ihsaan (2022) Collective bargaining and spillovers in local labor markets. CEP Discussion Papers (1895). London School of Economics and Political Science. Centre for Economic Performance, London, UK.

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How does collective bargaining affect the broader wage structure? How are such spillovers transmitted? I present a model where firms with wage-setting power that are not covered by collective bargaining agreements, but are close to collective bargaining firms, are incentivized to increase their wages alongside these wage agreements. My model suggests an empirically rich measure of closely connected firms, the flow of workers between them. I test my hypotheses across a decade of wage agreements matched with worker-level data in South Africa. I show that bilateral worker flows reflect a wide range of firm characteristics, capturing firm links which are poorly predicted by industry and location. Observed wages in collective bargaining firms follow sharp increases in prescribed wages, and indeed firms more closely connected by worker flows to covered firms differentially increase wages more. My implied cross-wage elasticity is higher than comparable estimates in the literature because I am able to pin down the labor market segments empirically relevant to wage spillovers. A microdata simulation suggests that spillovers double the intensive and extensive margin effects of collective bargaining agreements on the full wage distribution.

Item Type: Monograph (Discussion Paper)
Official URL:
Additional Information: © 2022 The Author
Divisions: Centre for Economic Performance
Subjects: H Social Sciences > HD Industries. Land use. Labor
H Social Sciences > HB Economic Theory
H Social Sciences > HC Economic History and Conditions
JEL classification: J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J31 - Wage Level and Structure; Wage Differentials by Skill, Training, Occupation, etc.
J - Labor and Demographic Economics > J4 - Particular Labor Markets > J42 - Monopsony; Segmented Labor Markets
J - Labor and Demographic Economics > J5 - Labor-Management Relations, Trade Unions, and Collective Bargaining > J51 - Trade Unions: Objectives, Structure, and Effects
L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L10 - General
Date Deposited: 30 Jan 2023 10:48
Last Modified: 16 May 2024 12:26

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