Risk Aversion, Collective Bargaining, and Wages in Germany

Abstract

We develop an open-shop model of trade union membership in which workers differ in their risk attitudes, and derive conditions under which the bargained wage will fall and union membership will increase with a general rise in risk aversion. Using data from the German Socio-Economic Panel we define broad bargaining units and show that wages decline as average risk aversion of union members in these units rises, controlling for individual effects of risk aversion. Given a negative relationship between wages and employment, this suggests that secular changes in risk attitudes, because of an aging workforce or greater female labour force participation, can help to explain variations in the employment performance of unionized economies.

Homo Economicus or Homo Ludens? A Survey of the Behavioral Motives of German Investors

“…Although overall German investors are more risk-averse than average (Goerke & Pannenberg, 2012), many investors feel that they can correctly assess the risk associated with stocks. Investors holding risky and highly risky forms of investment such as commodities futures are particularly convinced of their own capabilities and those of experts (see Figure 3).…”

A Sequential Decomposition of the Drop in Collective Bargaining Coverage

“…However, this could not be confirmed empirically (Antonczyk et al, 2010). Rather, the literature finds a stagnation or only a small drop in firm-level bargaining, for both West and East Germany (Ellguth and Kohaut, 2004, 2005, 2007, 2011, 2012, 2013, 2014. Therefore, and because both types of collective bargaining are rather similar, we will not further differentiate between these two types of agreements.…”

“…Although the application of a collective contract comes into effect voluntarily from the employer's side, they may come to be legally binding under certain conditions (Hold, 2003). Among those employees who work in establishments that are not covered by collective bargaining directly, about half work in establishments that still use the collective contract for orientation (Ellguth and Kohaut, 2004, 2005, 2007, 2011, 2012, 2013, 2014Addison et al, 2015). For the reasons discussed here, coverage by collective agreements is likely to exceed membership in an employer association (Schnabel and Wagner, 1996).…”

Risk Aversion and Trade‐Union Membership*

“…Agell and Lommerud (1992) andBurda (1995) analyse trade unions that insure workers against income shocks by compressing the wage structure. However, there is no differential insurance for members and non-members.4 Goerke andPannenberg (2012) provide evidence for such wage effects.C The editors of The Scandinavian Journal of Economics 2012.…”