Working Paper: NBER ID: w11829
Authors: 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.
Keywords: firm-level contracts; wage structure; Spain; matched employer-employee data; wage premiums
JEL Codes: J31; J50
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| firm-level contracting (L14) | wage premium (J31) |
| firm-level contracting (L14) | wages (J31) |
| firm-level contracts (L14) | longer job tenures (J63) |
| wage premium (J31) | non-competitive phenomenon (L19) |
| firm-specific contracts (L14) | wage premium (J31) |
| unobserved ability differences (D29) | wage determination (J31) |