Although European institutions and national governments have long pushed for a more decentralized wage bargaining structure, in some countries company or establishment-level negotiations struggle to take place. This paper offers an interpretation for that based on workers' optimal choices in an strategic framework. I construct an equilibrium matching model that explains under which conditions it is best for workers to negotiate their entire wage at sectoral level (one-tier bargaining) or to let a fraction of their salary to be negotiated at company level (two-tier bargaining). Workers' strategies do not simply depend on their own characteristics or on those of their firm, but also on the decisions of all the other employees of the sector. Three alternative Nash equilibria may occur: one-tier bargaining for all workers; two-tier bargaining for all workers; two-tier bargaining for the most productive workers and one-tier bargaining for the others. The prevalence of a specific equilibrium over others hinges on some critical factors, notably the elasticity of the matching function and the properties of the productivity distribution.
We use cookies to provide you with an optimal website experience. This includes cookies that are necessary for the operation of the site as well as cookies that are only used for anonymous statistical purposes, for comfort settings or to display personalized content. You can decide for yourself which categories you want to allow. Please note that based on your settings, you may not be able to use all of the site's functions.
Cookie settings
These necessary cookies are required to activate the core functionality of the website. An opt-out from these technologies is not available.
In order to further improve our offer and our website, we collect anonymous data for statistics and analyses. With the help of these cookies we can, for example, determine the number of visitors and the effect of certain pages on our website and optimize our content.