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The Effect of Firm-Level Contracts on the Structure of Wages: Evidence from Matched Employer-Employee Data

Author

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  • David Card
  • Sara de la Rica
Abstract
In many European countries sectoral bargaining agreements are automatically extended to cover all firms in an industry. Employers and employees can also negotiate firm-specific contracts. We use a large matched employer-employee data set from Spain to study the effects of firm-level contracting on the structure of wages. We estimate a series of wage determination models, including specifications that control for individual characteristics, co-worker characteristics, the bargaining status of the workplace, and the probability the workplace is covered by a firm-level contract. We find that firm-level contracting is associated with a 5-10 percent wage premium, with larger premiums for more highly paid workers. Although we cannot decisively test between alternative explanations for the firm-level contracting premium, workers with firm-specific contracts have significantly longer job tenure, suggesting that the premium is at least partially a non-competitive phenomenon.

Suggested Citation

  • David Card & Sara de la Rica, 2005. "The Effect of Firm-Level Contracts on the Structure of Wages: Evidence from Matched Employer-Employee Data," NBER Working Papers 11829, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:11829
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    Cited by:

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    2. Beatriz Muriel Hernández, 2016. "An Analysis of Firm Characteristics as Earnings Determinants: The Urban Bolivia Case," Development Research Working Paper Series 04/2016, Institute for Advanced Development Studies.
    3. Addison, John T. & Teixeira, Paulino & Zwick, Thomas, 2006. "Works councils and the anatomy of wages," ZEW Discussion Papers 06-086, ZEW - Leibniz Centre for European Economic Research.
    4. Dibeh, Ghassan & Fakih, Ali & Marrouch, Walid, 2018. "Labor Market and Institutional Drivers of Youth Irregular Migration: Evidence from the MENA Region," GLO Discussion Paper Series 261, Global Labor Organization (GLO).
    5. Amuedo Dorantes, Catalina & De la Rica Goiricelaya, Sara, 2005. "The Impact of Gender Segregation on Male-Female Wage Differentials," DFAEII Working Papers 1988-088X, University of the Basque Country - Department of Foundations of Economic Analysis II.
    6. Patrick Lünnemann & Ladislav Wintr, 2009. "Wages are flexible, aren?t they? evidence from monthly micro wage data," BCL working papers 39, Central Bank of Luxembourg.
    7. Mario Izquierdo & Aitor Lacuesta, 2006. "Wage inequality in Spain: recent developments," Working Papers 0615, Banco de España.
    8. Alcala, Francisco & Hernandez, Pedro J., 2005. "Firm characteristics, labor sorting, and wages," MPRA Paper 1226, University Library of Munich, Germany, revised 17 Nov 2006.

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    More about this item

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General

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