The purpose of this study is to investigate to what extent the existence of high labor adjustment costs has some influence on the process of wage negotiation. In…
The purpose of this study is to investigate to what extent the existence of high labor adjustment costs has some influence on the process of wage negotiation. In particular, it aims to analyse if the risk of being laid off has any impact on insiders' bargaining power and, consequently, on their wage claims.
A collective bargaining model that closely follows those developed by Nickell et al. and Bentolila and Dolado is adopted and a longitudinal panel of large Portuguese firms from all sectors over the 1993‐199 period is used.
The results reveal that firms where insider workers appear to have more bargaining power tend to pay higher wages. In particular, we found that the threat of dismissal tends to weaken insiders' bargaining power and, consequently, to depress wages.
In future research an attempt should be made to measure directly the labor turnover costs.
This paper presents robust empirical evidence using micro‐data for individual firms that support one of the predictions of the insider‐outsider theory that wages will be higher in sectors (firms) with high labor turnover costs.
In this paper a simultaneous-equations model of firm closing and wage determination is specified in order to analyse how wages adjust to unfavorable product demand shocks that raise the risk of displacement through firm closing, and to what extent an exogenous wage change affects the exit likelihood. Using a longitudinal matched worker-firm data set from Portugal, the estimation results suggest that, under the existence of noncompetitive rents, the fear of job loss leads workers to accept wage concessions, even though a compensating differential for the ex ante risk of displacement might exist. A novel result that emerges from this study is that firms with a higher incidence of minimum wage earners are more vulnerable to adverse shocks due to their inability to adjust wages downward. Indeed, minimum wage restrictions were seen to increase the failure rates.
Who works, how much one works, and what one earns are the cornerstones of labor economics. However, determining the answers to these questions can be tricky because many factors are involved in estimating labor supply, explaining the implications of labor demand, and determining the resulting earnings. This volume contains 13 chapters on these components of the labor market. Five deal directly with labor supply; four deal with labor demand, most notably the effect of cyclical demand fluctuations; and the remaining four deal with compensation, particularly wages, wage distributions, and fringe benefits.