P4

Projectmembers:
Prof. Bernd Fitzenberger, PhD, Friedrich-Alexander-University Erlangen-Nuremberg
Prof. Michael C. Burda, PhD, Humboldt-University Berlin
Dr. Thorsten Vogel, Humboldt-University Berlin
Dipl.-Volksw. Karsten Kohn, IZA Bonn

OECD countries differ significantly in their wage structures both between and within groups of workers of a given set of characteristics. This fact is commonly understood to be due to different labor market institutions. As one particularly important labor market institution, this project studies the impact of trade unions on the structure of wages, with a strong focus on the unions' influence on the variance and higher moments of the wage distribution. One possible theoretical explanation for empirical findings that wages of covered workers are relatively compressed is that collective bargaining seeks to structure wages so as to insure workers again the vagaries of the labor market. This includes fluctuations in earnings as well as the risk of losing one's job. Given this income insurance motive, unions may be even willing to accept lower wage levels. In the context of search and matching models, the formation of unions can be interpreted as voluntary pooling of employees, intended to restrict compensation schemes of firms when establishing new job matches. One goal of the research project is to analyze both approaches in a consistent theoretical framework, taking as a starting point the two papers Burda (1995) and Boeri & Burda (2003). This analysis should also derive testable empirical implications. A second goal of the project is to empirically examine links between various dimensions of the wage structure (wage levels, wage differentials, wage dispersion, intrapersonal wage dynamics) and measures for net union density (Beck & Fitzenberger 2003).