The impact of wage bargaining regime on firm-level competitiveness and wage inequality: The case of Ireland

Abstract

This paper uses a linked employer-employee dataset to analyze the impact of institutional wage bargaining regimes on average labor costs and within-firm wage dispersion in private sector companies in Ireland. The results show that while centralized bargaining reduced labor costs within both the indigenous and foreign-owned sectors, the relative advantage was greater among foreign-owned firms. The analysis suggests that there are potentially large competitiveness gains to multinational companies that locate in countries implementing a centralized bargaining system. Furthermore, the results provide additional support to the view that collective bargaining reduces within-firm wage inequality. © 2010 Regents of the University of California.