Series: Working Papers. 1131.
Author: Juan F. Jimeno and Carlos Thomas.
Topics: Labour market | Productivity | Non-financial corporations, businesses | Exchange rates | Quantitative methods.
Published in: European Economic Review, 59 (2013)
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Abstract
We compare labor market outcomes under firm-level and sector-level bargaining in a onesector Mortensen-Pissarides economy with firm-specific productivity shocks. Our main theoretical results are twofold. First, unemployment is lower under firm-level bargaining Second, introducing efficient opting-out of sector-level agreements suffices to bring unemployment down to its level under decentralized bargaining. For an archetypical contintental European calibration, we find that the unemployment rate is about 5 percentage points lower under firm-level bargaining or efficient opting out than under sector-level bargaining.