No Extension without Representation? Evidence from a Natural Experiment in Collective Bargaining

July 21, 2016

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Alexander Hijzen, and Pedro S. Martins No Extension without Representation? Evidence from a Natural Experiment in Collective Bargaining, (USA: International Monetary Fund, 2016) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

In many countries, notably across Europe, collective bargaining coverage is enhanced by government-issued extensions that widen the reach of collective agreements beyond their signatory parties to all firms and workers in the same sector. This paper analyses the causal impact of such extensions on employment using a natural experiment in Portugal: the immediate suspension by the government that took office in 21 June 2011 of the (until then) nearly automatic extensions. The combination of this suspension and the time needed for processing the extension applications resulted in a sharp and unanticipated decline in the extension probability of agreements signed several month earlier around 1 March 2011. Our results, based on a regression discontinuity design and matched employer-employee-agreement panel data, suggest that extensions had a negative impact on employment growth. Moreover, the effects tend to be concentrated among non-affiliated firms. The lack of representativeness of employer associations is a potentially important factor behind the adverse effect of extensions. Another is the role of retro-activity in combination with the administrative delay in processing extensions. This is particularly relevant in the context of a recession.

Subject: Employment, Employment protection, Employment rate, Labor, Wages

Keywords: Afffiliated firm, Affiliated firm, Affiliation status, Collective bargaining, Collective bargaining coverage, Employer association, Employer associations, Employment, Employment growth, Employment protection, Employment rate, Firm performance, Global, Growth rate, Industrial relations, Representativeness of collective agreements, Wage inequality, Wage setting, Wages, WP

Publication Details

Pages:

39
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2016/143
Stock No:

WPIEA2016143
ISBN:

9781498380508
ISSN:

1018-5941

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