Wage Dispersion and Decentralization of Wage Bargaining

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This paper studies how decentralization of wage bargaining from sector to firm level influences wage levels and wage dispersion. We use a detailed panel data set covering a period of decentralization in the Danish labor market. The decentralization process provides exogenous variation in the individual worker's wage-setting system that facilitates identification of the effects of decentralization. Consistent with predictions we find that wages are more dispersed under firm-level bargaining compared to more centralized wage-setting systems. However, the differences across wage-setting systems are reduced substantially when controlling for unobserved individual level heterogeneity.
Original languageEnglish
PublisherDepartment of Economics, University of Copenhagen
Pages25
Publication statusPublished - 2009

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