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The Impact of Wage Bargaining Regime on Firm-Level Competitiveness and Wage Inequality: The Case of Ireland

Authors

  • SEAMUS McGUINNESS,

  • ELISH KELLY,

  • PHILIP J. O’CONNELL

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       The authors’ affiliations are, respectively, The Economic and Social Research Institute, Whitaker Square, Sir John Rogerson’s Quay, Dublin 2, Ireland. E-mail: seamus.mcguinness@esri.ie. We are grateful to the Central Statistics Office (CSO) for access to the data used in this study.


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.

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