B06
Product Market Competition and Wage Formation
Discussion Papers

Discussion Paper No. 165
July 11, 2019

Trade Exposure and the Decline in Collective Bargaining: Evidence From Germany

Authors:

Baumgarten, Daniel (LMU)
Lehwald, Sybille (Federal Ministry for Economic Affairs and Energy)

Abstract:

We analyze the effect of the increase in trade exposure induced by the rise of China and the transformation of Eastern Europe on collective bargaining coverage of German plants in the period 1996-2008. We exploit cross-industry variation in trade exposure and use trade flows of other high-income countries as instruments for German trade exposure. We find that increased import exposure has led to an increase in the probability of German plants leaving industry-wide bargaining agreements, accounting for about one fifth of the overall decline in the German manufacturing sector. The effect is most pronounced for small and medium-sized plants.

Keywords:

international trade; import competition; collective bargaining

JEL-Classification:

F16; J51

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Discussion Paper No. 125
November 8, 2018

Dissecting Between-Plant and Within-Plant Wage Dispersion – Evidence From Germany

Authors:

Baumgarten, Daniel (LMU Munich)
Felbermayr, Gabriel (ifo Institute)
Lehwald, Sybille (Federal Ministry for Economic Affairs and Energy)

Abstract:

Using rich linked employer-employee data for (West) Germany between 1996 and 2014, we analyze the most important drivers of the recent rise in German wage dispersion and pin down the relative contribution of plant and worker characteristics. Moreover, we separately investigate the drivers of between-plant and within-plant wage dispersion. We also analyze the sources of the recent slowdown in German wage inequality and compare the results for West Germany to the ones for East Germany. We disentangle the relative contribution of each single variable to the rise in wage dispersion using recentered influence function (RIF) regressions. The most important drivers of wage dispersion are industry effects and the bargaining regime. The former predominantly works through the wage structure effect while, in the latter case, both the decline in collective bargaining coverage and the strong increase in wage dispersion within the group of covered plants have played a substantial role. While education has been another factor contributing to both between-plant and within-plant wage inequality, other candidate factors such as plant size, the exporting status, plant technology, and investment intensity are all of little if any direct quantitative importance for the increase in wage dispersion.

Keywords:

wage inequality; decomposition; rif-regression; linked employer-employee data

JEL-Classification:

J31; J51; C21; F16

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