The Impact of Unionization Structures with Heterogeneous Firms and Rent‐Sharing Motives

Abstract

How are unemployment and output affected if wages are set on the sector level rather than firm level? We take a new look at this question, allowing for heterogeneous firms and rent-sharing motives. Without these motives, employment and output are lower under sector-level wage-setting due to higher wage markups. With rent-sharing motives, however, firm selection is higher under sector-level wage-setting, which tends to increase employment and output, thus counteracting the markup effect. Simulations show that the firm-selection effect decreases the difference between the two unionization structures substantially but it does not change the signs of the effects on output and employment.

Industrial Relations Reform, Firm‐Level Bargaining and Nominal Wage Floors

“…Hence, restructuring the industrial relations framework may alter the motives and characteristics of the agents participating to wage floor negotiations. This eventually is expected to alter the structure of firm-level contracting, the determinants of contractual nominal wage floors and employment as well (Katz, 1993;Jimeno and Thomas, 2013;de Pinto, 2017).…”