Applied Seminar 
Time: 12:15 pm – 13:30 pm
Date: 22th of January
Room : 3001

Ihsaan Bassier (LSE) “Collective Bargaining and Spillovers in Local Labour Markets”

Abstract : How does collective bargaining affect the broader wage structure? How are such spillovers transmitted? In imperfectly competitive labour markets, a rise in wages in the covered sector can improve the outside options of workers in the noncovered sector. I use a decade of wage agreements matched with worker-level data in South Africa to study the effects of sharp changes in collectively bargained wages in an event-study framework. Observed wages in covered firms rise sharply, and within-firm wage inequality declines. I use interfirm worker flows as a measure of distance to test for spillovers, which I motivate with a model where wage changes are transmitted via outside options to nearby firms. Bilateral worker flows correlate with a wide range of firm characteristics, capturing firm links which are poorly predicted by industry and location. I show that firms with higher flows to covered firms differentially increase wages more, with an implied cross-wage elasticity of about 0.8. This is higher than comparable estimates in the literature because I am able to identify the labour market segments empirically relevant to wage spillovers. Firm profit margins decline, as predicted by the model. A microdata simulation suggests that spillovers double the effects of collective bargaining agreements on the full wage distribution.

Organizer: Sara SIGNORELLI