Abstract
This compilation of summaries of Working Papers released during January-June 1993 is being issued as a part of the Working Paper series. It is designed to provide the reader with an overview of the research work performed by the staff during the period. Authors of Working Papers are normally staff members of the Fund or consultants, although on occasion outside authors may collaborate with a staff member in writing a paper. The views expressed in the Working Papers or their summaries are, however, those of the authors and should not necessarily be interpreted as representing the views of the Fund. Copies of individual Working Papers and information on subscriptions to the annual series of Working Papers may be obtained from IMF Publication Services, International Monetary Fund, 700 19th Street, Washington, D.C. 20431. Telephone: (202) 623-7430 Telefax: (202) 623-7201
Until now, “wage bargaining” literature has focused primarily on macroeconomic outcomes. This paper, in contrast, examines the micro-economic issues of wage bargaining, which have received scant attention to date. Specifically, the paper uses an efficiency wage model with insider-outsider features to appraise the following questions: (a) under what conditions is centralized wage bargaining more profitable than decentralized bargaining for an individual firm? (b) what are the characteristic features of firms that prefer decentralized to centralized bargaining? and (c) has the proportion of firms that prefer decentralized to centralized bargaining been increasing or decreasing over time?
The paper provides useful theoretical insights into the issues involved in shifting from centralized to decentralized wage bargaining in the Swedish case. It concludes that (a) both high-technology and low-technology firms will increase their profitability by shifting from centralized to decentralized bargaining; (b) firms in the “intermediate” technology range may not benefit by moving from centralized to decentralizec bargaining; and (c) given the recent shift to more flexible work practices that characterize the “post-Fordist” environment, firms may prefer decentralized wage bargaining. That is, the pressure to decentralize wage bargaining, as evidenced recently in Sweden, may be based on objective criteria. Simulations are carried out to illustrate and reinforce these theoretical results.