Firm wage premia, industrial relations, and rent sharing in Germany

Research output: Journal contributionsJournal articlesResearchpeer-review


The authors use three distinct methods to investigate the influence of industrial relations on firm wage premia in Germany. First, ordinary least squares (OLS) regressions for the firm effects from a two-way fixed-effects decomposition of workers’ wages reveal that average premia are larger in firms bound by collective agreements and in firms with a works council, holding constant firm performance. Next, recentered influence function (RIF) regressions show that premia are less dispersed among covered firms but more dispersed among firms with a works council. Finally, in an Oaxaca–Blinder decomposition, the authors find that decreasing bargaining coverage is the only factor they consider that contributes to the marked rise in premia dispersion over time.
Original languageEnglish
JournalIndustrial and Labor Relations Review
Issue number5
Pages (from-to)1119-1146
Number of pages28
Publication statusPublished - 01.10.2020

Bibliographical note

Funding Information:
We thank Paul Beaudry, Michael Böhm, Alex Bryson, Michael Burda, Stefano Collonello, Bernd Fitzenberger, Hanna Frings, Giovanni Gallipoli, Nicole Gürtzgen, Florian Hoffmann, Pat Kline, Claus Schnabel, Heiko Stüber, and two referees for very useful suggestions. We further appreciate comments by participants of the SOLE 2017 and VfS 2017 conferences and the Pakt Project Workshop on “Worker Flows, Match Quality, and Productivity” and by seminar participants in Berkeley, Berlin, Lüneburg, and Vancouver. Last but not least, we thank Alexander Giebler and Georg Märker for excellent research assistance.

Publisher Copyright:
© The Author(s) 2020.

    Research areas

  • Economics - firm wage premium, industrial relations, trade unions, works councils, bargaining power, rent sharing, wage inequality, Germany