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Decentralized versus Centralized Collective Bargaining: Is the Collective Bargaining Structure in Spain Efficient?

Author(s): Jesus Ferreiro Source: Journal of Post Keynesian Economics, Vol. 26, No. 4 (Summer, 2004), pp. 695-728 Published by: M.E. Sharpe, Inc. Stable URL: http://www.jstor.org/stable/4538902 . Accessed: 27/03/2014 05:25
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696

JOURNALOF POST KEYNESIAN ECONOMICS

in placeinfluence theinterwhether and,moreconcretely, paygrowth, in collectivebargaining in Spaindo give rise to exmediate structures cessive increases in wages and salaries that affect inflation and rates. To thisaim,first,we present thedataon collective unemployment in we thatthe structures test the Spain.Second, bargaining hypothesis in unemployis a determinant degreeof collective negotiation coverage ment.Finally,we analyzethe influence of collectivebargaining structurein Spainon pay increases, as agreedwithinthe various functional levelsof suchbargaining. framework Theoretical labor work inanefficient Intheneoclassical markets models, way.Wage Workto theindividual aresetaccording levelandgrowth productivity. of ers are hiredup to the level in whichmarginal productivity labor real is price,leadequals wage.Wagelevel,therefore, a clearing-market thatis, fullemployment. fromthis ing to anequilibrium, Anydeparture modelleadsto an inefficient of the labor market: wageswill working If wages andthe equilibrium will not be reached. not clearthe market are not set in an individual way but in a collectiveway, productivity willnotbetheonlydeterminants levelandgrowth of wages.Thecolleca bargaining that tiveactionwill give workers power will be usedto get thanthemarket-clearing ones. "excessive" wages,thatis, wageshigher The excessivewage will be the ultimate reasonof the unemployment. willdepend Thesizeof unemployment onthesizeof theexcessivewage. will directly Therateof coverage of thecollectivebargaining influence ratesof unemthesize of theexcessivewage,and,therefore, thecurrent andinflation et al., 1991; andJimeno, 2002;Layard (Bentolila ployment Millard andMortensen, Nickell and van 1997; Milner, 1995; Ours, 2000). of collective Besidesthecoverage its structure is alsoimbargaining, the degreeof coordination of wage-setting portant: systemsinfluence on influence the macroeconomic and,consequently, directly paygrowth in terms outcomes of inflation andunemployment. Thereason is thatthe internalization of the externalities from an excessive arising wage deof the of centralization-decentralization of collective barpends degree In labormarket, an excessivewage-that is, a gaining. a neoclassical thantheindividual thatworkers canwagehigher productivity-means notgetajob:foranemployed anexcessivewageclaimwilllead worker, to losinghis or herjob. Unemployment will alwaysbe voluntary and individual. if thewagesaresetcollectively, anexcessivewage However, claim doesnotnecessarily leadtojoblosssincethenegative consequences

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DECENTRALIZED CENTRALIZED COLLECTIVE BARGAINING VERSUS 697

of theexcessivewageclaims canbeexternalized. If thesubsequent profit squeezeis offsetwithhigher prices,all theagentswill be affected by an inprices. increase Butif thehigher are not offset an wages fully by equivalentpriceincrease, and,subsequently, profits,investment employment canbe negatively Inanopeneconomy, affected. anincrease in inflation will leadto lowercompetitiveness andemployment. of an excessivewage growthare Onlyif the negativeconsequences an economywill reachbettermacroeconomic outcomes, internalized, thatis, lowerratesof unemployment andinflation. thestrucTherefore, can the tureof collective macroeconomic outcomes. bargaining improve thereis nota generalized consensus aboutwhatsystemof Nonetheless, collective thebestmacroeconomic outcomes: some bargaining generates authors that centralized and decentralized simiargue fully generate fully larpositiveoutcomes, otherauthors the that better outcomes are argue argenerated by a fullydecentralized system,and,finally,otherstudies is the best one and Sachs, (Bruno gue thata fully centralized system andDrifill,1988;Layard et al., 1991;Nickellandvan 1985;Calmfors Ours,2000;Soskice,1990). Ina decentralized collective wagesaresetfortheworkers bargaining, of a firmor company. If we assumethatthe only content of collective is to set therateof wagegrowth, thismustbe similar to the bargaining productivity growthin every unit.An excessivewage growthwould a profitsqueezethatwouldleadto lowerinvestment andemgenerate or to ployment higherpricesthatwouldleadto lowercompetitiveness andemployment. In anycase,it will be in theinterest of theworkers to set excessivewagesthatcanendanger their jobs. Onthecontrary, in a fullycentralized collective theobjecbargaining, tiveof thetrade unionsis to improve thewelfare andthejob security of all the workers. A wagegrowth will be passedfor the wholeeconomy thatdoesnotgenerate macroeconomic Thecurnegative consequences. rentlevels of unemployment andinflation will be key determinants of thewagegrowth andnationwide will be the productivity growth guideline for thecommon Thecompanies or industries whose wagegrowth. is productivity growth below the nationwide productivity growthwill sufferfromanexcessivewagegrowth; thosenegative consehowever, and destruction in those will unions, quences, higher prices employment be fully offsetby the fallingpricesandthe creation of employment in thehigher industries andcompanies. productivity Therelation collective structures andmacroeconomic among bargaining outcomes involvesthatthelevelof thenon-accelerating inflation rateof in an is related to the (NAIRU) unemployment economy prevailing wage

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698 JOURNAL OF POSTKEYNESIAN ECONOMICS

structure (Martin, 1999).Inthissense,ceteris bargaining paribus, changes in thecollectivebargaining will alsochangetheNAIRU,thus structure curve: to a morecentralized or dePhillips changes movingthevertical willreduce centralized collective theNAIRU,whilechanges bargaining will increase to an intermediate structure theNAIRU. A descriptionof collectivebargainingin Spain thecurrent structure of collective barOneof themaincriticisms against in intermediate a structure that has intensified is its degree, gaining Spain onintheincomes overtheyearssincethewagemoderation policy agreed pacts (Revenga,1994), as signedsince 1977 (whenthe Pactosde la andthedifferent weresignedby thegovernment Moncloa political paruntil1984 from and unions business with the ties, organizations) support Economico y Social). (yearof thesigningof theAcuerdo the above theoretical the or to analyses, fullydecentralized According shouldprovideequallyefficientoutcentralized collectivebargaining Both collectivebargaining structures comes regarding pay increases. It wouldbe the sameto optfor a decenshouldturnoutto be identical. or for a centralized one. In a strictly theostructure tralized bargaining collective means a centralized retical view,this equating fully bargaining a singlerateforpaygrowth is setforthewholeeconomy where structure individualized structure (a wage-incomes policypact)andanabsolutely In in of means terms the this (in case, wagegrowth). equating, Spanish withinterms of macroeconomic efficiency, agreements company-level at national level. This would make them dustryagreements equivalent whereonly comstructure to each other,first,a collectivebargaining structure exist, second,a collectivebargaining pany-levelagreements where a mixed national exist, and, only industry-level finally, agreements wherethere is onlya structure situation wherein bothkindsof collective coexist. bargaining agreements As seen in Table 1, showingthe salaried employeescoveredby the different functional levelsof collective theSpanish casedifbargaining, fersfromthe abovesituation. Thecollectivebargaining is an structure intermediate of provincial collective one,witha predominance industry From1981to 2001,theshared bargaining agreements.' company-level andthoseagreedat a national level fell from54.9 agreements industry to 35.8 This is in the case of compercent. percent drop moremarked
IThose affecting firms of a specific industryand located in a province.

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Table 1 Workers covered by collective bargaining agreements 1981 Total Company agreements Provincial Regional Interregional Other agreements Companies group Local industry Provincialindustry industry Interprovincial Regional Interregional Nationalindustry 4,435,178 928,934 377,967 35,768 515,199 3,506,244 40,573 14,616 1,893,325 53,287 8,168 45,119 1,504,443 1982 6,262,875 985,682 418,091 13,846 553,745 5,277,193 14,685 29,426 3,326,614 135,605 6,585 129,020 1,770,863 1983 5,610,999 984,396 417,736 8,880 557,780 4,626,603 12,370 23,620 2,921,102 176,697 176,697 1,492,814 1984 6,181,921 1,060,494 495,232 11,269 553,993 5,121,427 16,755 17,165 3,316,789 232,051 75,867 156,184 1,538,667

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Table 1 (Continued) 1988 Total Company agreements Provincial Regional Interregional Other agreements Companies group Local industry Provincialindustry industry Interprovincial Regional Interregional National industry 6,864,738 1,070,424 478,876 31,246 560,302 5,794,314 12,071 16,104 3,761,432 132,242 110,510 21,732 1,872,465 1989 6,993,751 1,061,926 503,519 24,091 534,316 5,931,825 10,582 19,862 3,804,184 203,870 191,729 12,141 1,893,327 1990 7,623,867 1,132,581 529,730 38,005 564,846 6,491,286 12,795 11,476 4,173,171 303,952 214,600 89,352 1,989,892 1991 7,821,850 1,151,003 550,979 33,743 566,281 6,670,847 17,200 10,538 4,380,753 303,612 208,796 94,816 1,958,744

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1995 Total 7,605,073

1996 8,128,193

1997 8,365,095

1998 8,750,577

1,021,507 1,043,730 998,342 1,061,474 Company agreements Provincial 492,315 484,725 474,392 487,218 79,272 59,814 74,141 80,979 Regional 449,920 509,524 500,115 432,638 Interregional Otheragreements 7,066,719 7,729,070 6,561,343 7,366,753 46,779 28,066 34,803 34,948 Companies group Local industry 11,223 11,169 136,724 13,793 Provincialindustry 4,536,484 4,202,023 4,218,987 4,297,015 447,161 534,452 255,714 486,748 Interprovincial industry 525,997 237,371 428,668 481,646 Regional 8,455 18,343 5,102 18,493 Interregional National industry 2,600,132 2,064,371 2,534,394 2,228,899 andAsunto Source:Anuariode Estadisticas dae Misterio Laborales Trabajo y de AsuntosSociales,
* provisional data.

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702 JOURNALOF POST KEYNESIAN ECONOMICS

pany-level agreements,a continuousandprogressivefall (falling to 11.3 percentof the total salariedemployees covered by such agreementsin 2001), than in thatof the industryagreementsat a nationallevel, which rose from 1991 until 1999. Anothercriticismaimedat the Spanishcollective bargainingstructure is its excessive atomization,arisingfrom the excessive numberof noncompany-level collective bargainingagreements,thus making the requiredcoordinationnecessary for collective bargainingdifficult. Table 2 shows the high numberof collective bargainingagreementssigned in 2000, which would confirm the increasingatomizationin Spanishcollective bargainingif we consider the increase in the total number of agreements signed since 1981. Nonetheless, in 2000, 73.3 percent of total collective bargainingagreementswere company agreements:between 1981 and 2000 types of collective bargainingagreementsother thannoncompanyones increasedby 55.2 percentwhile company-level ones rose by 117.7 percent.In fact, the much-reviledprovincialagreements have kept steady since 1992. Thus, the structural atomizationof collective bargainingin Spain is a directconsequence of this rising decentralization. However, the atomizationof collective bargainingshould not be analyzed looking solely at the numberof collective bargainingagreements signed but also at the totalnumberof employees coveredby such agreements. The rise in the number of company-level agreements has not resultedin an increasein the numberof employees covered by this form of collectivebargaining, suchrise beingminimalbetween 1981 and2000. On the contrary,in that period there has been a high increase of the workerscoveredby nationalindustryagreementsand,mainly,by industry agreementsat a provinciallevel. This conclusion is reinforcedif we analyze Table 3. Until 1997, the averagenumberof employeescoveredby each collective agreementwas lower thanthatof the early 1980s. Since then,the averagesize of collective bargainingagreementsincreased,because of the increasein higher level agreements. The size of company-level agreements has slowly fallen, a directoutcomeof the fall in averagesize of Spanishcompanies. The atomizationin Spanishcollective bargainingis, therefore,a direct consequenceof the rise in the numberof company-levelagreementsand the decreaseregisteredin the averagesize of Spanishcompanies.Actually, the very existence of this phenomenonof smaller workforces in Spanishcompaniescreatesseriousdoubtsaboutthe viabilityof a decentralizedcollective bargainingstructurein a productivestructuredominatedby very small companies(Fina et al., 2001).

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Table 2 Collective bargaining agreements 1981 Total Company agreements Provincial Regional Interregional Other agreements Companies group Local industry Provincialindustry Interprovincial industry Regional Interregional Nationalindustry 2,672 1,768 1,543 32 193 904 45 31 767 17 8 9 44

signed in Spain for functional levels of bargaini 1982 3,473 2,242 1,935 16 291 1,231 27 46 1,077 27 9 18 54 1983 3,176 2,083 1,735 22 281 1,138 31 42 998 16 -6 16 51 1984 3,796 2,539 2,231 31 277 1,257 34 43 1,108 22 16 50

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Table 2 (Continued) 1988 Total Company agreements Provincial Regional Interregional Other agreements Companies group Local industry Provincialindustry Interprovincial industry Regional Interregional National industry 4,096 2,826 2,464 40 322 1,270 20 36 1,126 29 20 9 59 1989 4,302 3,016 2,637 50 329 1,286 25 36 1,135 27 20 7 63 1990 4,595 3,254 2,839 55 360 1,341 33 31 1,179 31 20 11 67 1991 4,848 3,474 3,021 63 390 1,374 43 33 1,203 30 21 9 65

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1995 Total 4,827

1996 5,028

1997 5,040

1998 5,091

3,690 3,669 3,461 3,661 Company agreements Provincial 3,200 3,174 2,993 3,174 111 136 125 95 Regional 354 373 376 370 Interregional Other agreements 1,401 1,366 1,367 1,371 65 67 68 70 Companies group 31 26 31 Local industry 26 Provincialindustry 1,174 1,159 1,147 1,145 54 47 38 44 Interprovincial industry 51 32 37 43 Regional 4 3 7 6 Interregional 82 National industry 80 76 75 andAsuntos Source:Anuariode Estadisticas Laboralesy de AsuntosSociales, Ministeriode Trabajo data. * provisional

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Table 3 Average number of workers covered by collective 1981 Total Company agreements Provincial Regional Interregional Other agreements Companies group Local industry Provincialindustry Interprovincial industry Regional Interregional Nationalindustry 1,646 522 244 1,084 2,589 3,828 863 487 2,424 2,960 908 5,013 37,611 1982 1,850 451 221 865 2,014 4,401 524 654 3,171 5,650 941 7,589 33,413

bargaining agreement 1983 1,730 470 234 386 1,937 4,020 412 576 2,886 11,044
-

1984 1,629 418 222 364 2,000 4,074 493 399 2,993 10,548 12,645 9,762 30,773

11,044 28,708

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1988 Total Company agreements Provincial Regional Interregional Other agreements Companies group Local industry Provincialindustry Interprovincial industry Regional Interregional National industry 1,676 379 194 781 1,740 4,562 604 447 3,341 4,560 5,526 2,415 31,737

1989 1,626 352 191 482 1,624 4,613 423 552 3,352 7,551 9,586 1,734 30,053

1990 1,659 348 187 691 1,569 4,841 388 370 3,540 9,805 10,730 8,123 29,700

1991 1,613 331 182 536 1,452 4,855 400 319 3,642 10,120 9,943 10,535 30,135

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Table 3 (Continued) 1995 Total 1,576 1996 1,617 1997 1,660 1998 1,719

277 272 290 302 Company agreements 154 153 154 159 Provincial 583 648 668 630 Regional 1,330 1,271 1,169 1,366 Interregional Other agreements 5,517 4,803 5,373 5,170 720 512 499 419 Companies group 432 445 430 Local industry 4,410 3,753 Provincialindustry 3,864 3,626 3,678 9,897 10,356 10,163 6,729 Interprovincial industry 10,314 11,201 11,586 7,418 Regional 2,818 1,276 2,642 3,057 Interregional 31,709 31,680 29,719 National industry 27,163 andAsuntos de Trabajo Laborales Source:Anuariode Estadisticas y de AsuntosSociales, Ministerio * provisional data.

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709 BARGAINING COLLECTIVE CENTRALIZED VERSUS DECENTRALIZED

The in collective Table4 showsrealwagegrowth bargaining.2 agreed canbe Threeperiods realwagegrowth. secondrow showstheaverage the effects of the reflects Thefirstperiod differentiated. (1981-86) implerealwage of theincomes mentation negative policieswitha generalized In the secondperiod(1987-92),thereis generalized wageexgrowth. of the levels with unemploydespite high paygrowth pansion significant moderation since1993,a strong thisperiod. ment recorded Finally, during and of salaried is clear, theexpansion inpaygrowth employment despite since 1995. thedropin therateof unemployment a clearlydefinedrelaof proposing Thesedatashowthe difficulties of collectivebargainbetween thedegreeof (de)centralization tionship over the The resultsvaryconsiderably ing andthe real wage growth. is in the the agreements company-level period.Although wagegrowth of the other collective lowerthantheaverage bargaining agreegrowth andtherestof theagreebetween ments, company-level anycomparison levels operatein Spanish mentshidesthe fact thatvariousfunctional as well as the fact that,even withincompanycollectivebargaining, functional levels.It is notfoundin thereexistvarious level agreements, but where lower risesarerecorded pay agreements company provincial alin regional andinterregional However, agreements. company-level to thegreatest correspond agreements company-level though provincial to plant-byin collectivebargaining, tending degreeof decentralization the or agreecompany-level negotiations, higher plant workplace-level frompay better the negativeeffectsderived mentsseemto internalize thusbeingmoreefficient. increases, at a higher level thancompany-based someagreements Furthermore, as hapincreases lower than the national ones alsorecord average, pay industry interregional interprovincial pens withgroupsof companies, 1991 for ornational level agreements, (since industry-level agreements at the those the latter). In anycase, the intermediate-level agreements, level, are those with higherpay increases,which provincial industry wouldpointto a lowermacroeconomic efficiencyin thistypeof agreeandnational mentandthusarguesin favorof companyindustry-level agreements. a linear witha positive we cannot detect Nonetheless, slope relationship or the traditional "inverted-U" or "hump-shaped" curvewherecentral-

2 We calculatedreal wage growthdiscountingthe yearly inflationrate (consumer price index [CPI]) from the nominal wage growth.

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Table 4 Real wage growth passed in collective bargaining 1981 Total Company agreements Provincialcompany Regional company Interregionalcompany Companies group Other agreements Local industry Provincialindustry Interprovincial regional industry Interprovincial interregional industry National industry -1.44 -2.68 -2.47 -0.68 -2.98 -0.4 -1.12 -2.39 -1.33 -9.27 -2.18 -0.77 1982 -2.38 -3.25 -3.58 -1.03 -3.06 -2.15 -2.21 -3.32 -2.45 -3.39 -1.94 -1.77 1983 -0.75 -0.51 -0.82 0.35 -0.29 -1.04 -0.80 -2.22 -0.99 1.33 -0.68 1984 -3.49 -4.28 -3.88 -3.71 -4.64 -3.86 -3.33 -4.75 -3.49 -1.65 -3.29 -3.03

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1988 Total Company agreements Provincialcompany Regional company Interregionalcompany Companies group Other agreements Local industry Provincialindustry Interprovincial regional industry Interprovincial interregional industry National industry 1.58 0.89 1.09 0.7 0.73 1.4 1.70 1.86 1.6 2.99 1.47 1.83

1989 0.97 0.54 0.72 1.95 0.73 0.79 1.04 0.24 1.06 0.47 -0.01 1.08

1990 1.63 1.35 1.5 1.9 1.17 1.48 1.67 1.49 1.65 1.61 1.12 1.76

1991 2.06 1.91 2.05 1.87 1.77 1.07 2.09 1.8 2.15 1.75 1.31 2.04

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Table 4 (Continued) 1995 Total Company agreements Provincialcompany Regional company Interregionalcompany Companies group Other agreements Local industry Provincialindustry Interprovincial regional industry Interprovincial interregional industry National industry Source:Author'scalculations. * provisional data. -0.76 -1.01 -0.67 -0.52 -1.38 -0.87 -0.72 -0.72 -0.66 -0.83 -0.57 -0.84 1996 0.22 -0.13 0.04 -0.03 -0.32 -0.36 0.27 0.34 0.34 1.14 -0.41 -0.02 1997 0.87 0.31 0.55 -1.02 0.28 0.13 0.95 1.18 0.96 1.55 0.9 0.83 1998 0.76 0.76 0.64 0.42 0.18 0.39 0.80 0.72 0.86 1.11 1.12 0.65

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DECENTRALIZED VERSUS CENTRALIZED COLLECTIVE BARGAINING 713

Table 5 Maximumand minimum real wage growth for collective bargaining structures Lowestreal wage growth Provincial company Regional company Interregional company of companies Group Localindustry Provincial industry Interprovincial regional industry Interprovincial interregional industry National industry 1982 1985, 1987,1988, 1992,1993,1997, 1999, 2001 1995 1986,1994,1998 1983, 1984 1981 1989, 1990,1991, 1996,2000 Highestreal wage growth 1982, 1985, 1989, 1995 1981 1987, 1994 1991,1992,1993 1984, 1986, 1988, 1996,1997,1999 1983,1998, 2001 1985,1990, 2000

ized and decentralizedcollective bargainingagreementsreach similar

in terms of wagegrowth, outcomes withthehighest growth beingregisteredin intermediate the distribution of theminiagreements. Actually, mumandmaximum realpayincreases in realtermson a yearlybasisis
very irregular(see Table 5). Therefore,it is difficult to state that there exists a functionallevel thatcould be consideredfroma macroeconomic perspectiveas the most efficient one ( in termsof wage flexibility). With the aim of solving the problemsby analyzingpay increaseson a yearly basis, we have calculatedthe accumulated growthof collectively over the 1981-2000 bargainedagreed pay period. In aggregateterms, the accumulatedgrowthof real wages is 0.79 percent.A more detailed calculation,broken down accordingto each functionallevel of collective bargaining,is shown in Figure 1. In accumulatedterms, the relaof collective tionshipbetweenwage rises andthe degreeof centralization those agreements bargainingacquireswhat we could name a "J-form": that representthe most decentralizedcollective bargainingprocedures have experiencedan accumulation of dropsin realtermsof agreedwages. the and national industry agreements show Only provincial industry positive accumulatedwage growthin real terms. Macroeconomic consequences of collective bargaining in Spain In the rest of the paper,we test whethercollective bargainingin Spainis a determinant of the ratesof unemployment andinflation.Althoughsince

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714 JOURNAL OF POST KEYNESIAN ECONOMICS

of realwagespassedin collective growth bargaining Figure 1 Accumulated

(1981-2000)
2.38

~~~2
.2O1 '

------

-----------,,XI }I

-1.84
.. W' -0.26

I -6 -8-4.56
-

-3.99

-2 ,

' 2 :.96

*6.

calculates. Source: Author's

Source: Author's calculations.

hasbeenfalling,thecurthemid-1970s 2), therateof inflation (Figure in 2002) is higherthanthosein most rentrateof inflation (3.5 percent Union.Besides,theratesof unemof theEuropean members Monetary in 2002). Union(11.4percent arethehighestin theEuropean ployment the coverageof Ourobjectiveis twofold.First,we will test whether outcomes is a determinant of themacroeconomic collectivebargaining and inflation of theSpanish Second,we will economy, unemployment. of collectivebargaining, thatis, thedegreeof thestructure testwhether of The collective affects those outcomes. (de)centralization bargaining, is that and the structhat lies these relations the behind coverage logic influences the wage growth(passingextureof collectivebargaining cessivesalaries) andunemployment. and,hence,theratesof inflation We have estimated different for fourdifferent functions dependent variables: therateof growth of realwagespassedin collectivebargainof salaried therateof growth of the ing,3therateof growth employment, rateof unemployment, and,finally,the rateof growthof the rateof We use as explanatory inflation. elements variables related to themacroeconomic outcomes(gross domesticproduct[GDP],employment, andto institutional the wage-setunemployment), aspectsinfluencing and labor market and,finally,to reforms) tingprocess(incomes policy
3 Wage growth includes cost-of-living clauses.

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715 BARGAINING COLLECTIVE VERSUS CENTRALIZED DECENTRALIZED

in Spain(percent) andunemployment Figure 2 Ratesof inflation


2624 22 - ----.

20 /- 1816 ---14 1210 8 6 q--.

o ' fi2-io-------

-----O----------------'--,

_
S

>

o Po 65ceaS as o

o o

f |-*-

Xo--o-x 0---oo oo oho Stoo9

9", 9
g

---_
038 8

Unemployment

--

Inflation

Source: National Instituteof Statistics(www.ine.es).

in Spain.Thefuncof collectivebargaining thecoverage andstructure leastsquares tionsestimated (OLS)fortheperiod1983usingordinary variables thefollowing:4 2000 includeas explanatory of realGDP. GDP:rateof growth variable thevalueonefortheyears Incomes dummy adopting policy: whenincomes (1983, 1985,1986)and policieswereimplemented zerofortheremaining years. of thelabor thatshowstheconsequences variable LMR84: dummy thevalueone sincetheyear market reform passedin 1984,taking 1984,zerofortheremaining years. variable thatshowstheconsequences of thelabor LMR94: dummy market reform thevalueone sincetheyear passedin 1994,taking 1994,zerofortheremaining years. LMR97: variable thatshowstheconsequences of thelabor dummy in market reform the value one since theyear passed 1997,taking 1997,zerofortheremaining years. rate of of salaried growth Employment: employment. of rate of Unemployment: growth therateof unemployment.
4

Regressions have been calculated using the program SPSS 11.0.

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OF POSTKEYNESIAN 716 JOURNAL ECONOMICS

rateof growthof therateof coverageof collectivebarCoverage: coveredby collectivebargaining as a percentgaining(workers of total salaried workers). age COVC: rateof growth of coverage of company-level collective barcovered collective bar(workers agreements gaining by company as a of total workers covered gainingagreements percentage by collective bargaining). of coverageof national colCOVNI: rateof growth industry-level inlectivebargaining covered national (workers agreements by collectivebargaining of total as a percentage dustry agreements workers covered bargaining). by collective rateof growth of coverage of company andnational inCOVCNI: collective covered (workers dustry-level bargaining agreements andnational collective bycompany industry bargaining agreements of totalworkers as a percentage covered collective by bargaining). of coverage COVPI: rateof growth of provincial colindustry-level inlectivebargaining covered (workers agreements by provincial collectivebargaining as a percentage of total dustry agreements workers covered by collective bargaining). The last fourvariables arerelated to the structure of collectivebarThe of the that thelowcurve means gaining. hypothesis "hump-shaped" est ratesof unemployment andinflation areregistered whencollective is more or decentralized centralized. thishybargaining Extrapolating to this would involve an between a collecpothesis Spain, equivalence tivebargaining structure withonlycompany-level a structure agreements, withonlyindustry national-level and,finally,a mixedsituagreements, ationwhere thereonlyexistbothkindsof agreements. If thishypothesis weretrue,the key elementwouldnot be the rateof coverageof comor the rateof coverageof napanycollectivebargaining agreements tionalindustry but the rate of bothkindsof agreements joint of coverage An increase in this of agreements. joint rate coverageshouldlead to better macroeconomic outcomes. Onthecontrary, if thehypothesis were not true,the individual ratesof coverageof every kind of collective wouldbe the rightexplanatory variables of inbargaining agreements flationandunemployment. We expectthatanincrease in COVPI comeswithhigher ratesof inflation andunemployment, since all the theoretical studiesagreethatan intermediate structure of collectivebargaining leadsto excessivewage ratesof inflation andunemployment. Forthis and,hence,higher growth theexpected of COVCis thata risein thisrateof reason, consequence leadsto lowerinflation andunemployment. Theconsequence coverage

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DECENTRALIZED VERSUS CENTRALIZED BARGAINING 717 COLLECTIVE

of a higherCONVIis indeterminate, sincethe hypothesis of a humpstates that a rate leads to lower and inflation shaped relationship higher but the of a beunemployment, hypothesis positive-sloped relationship tweencentralization andwagegrowth claimsfortheopposite outcomes. Table6 showstheresults forrealwagegrowth. Column 12,including as explanatory thegrowth variables of GDP,incomes policies,thelabor market thecreation of employment, andthecoverage of collecreforms, tivebargaining, showsthebestoutcomes. the Surprisingly, signof real GDPgrowth is negative: aneconomic comeswitha fallin real expansion is that,as we will see later, of thisrelationship wages.An explanation thereis a positiverelationship between andinflation. economic growth inflation is the behavior of the markups, Spanish mostlyexplained by whichincrease economic and (Estrada Lopez-Salido, during expansions andSerrano in inflation more 2001;Ferreiro 2001b).The acceleration thanoffsetsanyeffectthateconomic (or creation) growth employment cangenerate on wagegrowth, to a fall in realwages. leading Theonlyvariables thatarestatistically areincomes policy, significant thecreation of employment, therateof unemployment exlower (with than the labor market reform planatory power employment), passedin The firstthree 1994,andtherateof coverageof collectivebargaining. havetheexpected variables creation sign:positivefor theemployment 1994 andnegative forincomes labor market and reform, unempolicies, Thevariables reto the 1984and 1997labormarket related ployment. forms arenotstatistically thesignof thecoefficients significant, although are the expected(positiveand negligiblefor the reformof 1984 and of 1994and 1997).5 The sign of the negativeandhighfor thereforms variable1994labormarket is in accordance reform withthe objective andcontent of thisreform, if we this mainly analyze in lightof the insider-outsider modeland if we assumethatcollectivebargaining reflectstheinterests of theinsiders, thatis, permanent workers. Whilethefirstreform fixed-term contracts, promoted employment givrise to a in boom that increased thebargaining temporary employment andthethird reform focused on the workers, ingpowerof thepermanent of reducing the highratesof temporary workers at objective (peaking
5Thefirstlabor market reform thefixed-term Its contracts. promoted employment direct wasnotto reduce butto promote thecreation of employobjective wagegrowth ment. Thetwolastreforms, within a classicinsider-outsider to foster model,tried thebargaining of permanent permanent employment by reducing (insiders) power workers. Whereas thefirstreform thewagesof thetemporary the workers, depressed 1994and1997reforms worked thepermanent workers' the against pay,thusaffecting in collective andSerrano, (Ferreiro wagegrowth passed 2001a). bargaining

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Table 6 Wages-dependent

variable: rate of growth of real wages passed in collective


(1) (2) 1.140 (0.740) -1.650*** (1.735) -0.594 (0.396) -1.513** (1.852) -0.343 (0.343) 0. 197** (2.013) (3) 3.056*** (1.701) -0.641*** (1.748) -1.783** (2.022) -1.069 (0.756) -2.003** (2.487) 0.084 (0.090) 0.491 ** (2.569)

(4)

Constant GDP Incomes policy LMR84 LMR94 LMR97 Employment Unemployment Coverage COVCNI COVC COVNI COVPI Adjusted R2 Standard error F-statistic Durbin-Watson

0.369 (0.208) 0.190 (0.906) -1.540*** (1.450) -0.115 (0.070) -1.271 *** (1.394) 0.864 (0.807)

1.42 (0.87

-1.595 (1.62 -0.423 (0.27 -1.587 (1.86 0.50 (0.49

-0.062 (1.73

0.003 1.342 1.012 1.699

0.204 1.200 1.872 1.672

0.321 1.108 2.337*** 2.226

0.148 1.24 1.59 1.73

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(7) Constant GDP Incomes policy LMR84 LMR94 LMR97 Employment Unemployment Coverage COVCNI COVC COVNI COVPI -0.146** (1.933) 0.161 (0.109) -2.158** (2.405) 0.934 (0.595) -1.896** (2.484) 0.429 (0.476) 0.090 (0.873)

(8) 1.824 (0.948) -0.496*** (1.396) -2.168** (2.518) 0.286 (0.182) -2.205* (2.882) 0.213 (0.242) 0.338*** (1.663) -0.119*** (1.590)

(9) 2.179 (1.014) -0.559 (1.377) -2.298** (2.389) 0.141 (0.084) -2.443** (2.411) 0.403 (0.385) 0.364*** (1.632) -0.112*** (1.397) 0.026 (0.383)

(10)

2.079 (1.061 -0.468 (1.266 -1.978* (2.101 -0.181 (0.101 -2.089* (2.571 0.145 (0.159 0.324 (1.553

-0.124* (1.599

-0.050 (0.614

0.352 0.348 0.364 0.403 Adjusted R2 Standard error 1.073 1.082 1.039 1.086 F-statistic 2.539*** 2.215 2.643*** 2.133 Durbin-Watson 1.668 2.214 2.144 2.335 arein parentheses; * significant Notes:Absolute t-values atthe5 p atthe 1 percent level;** significant

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720 JOURNALOF POST KEYNESIAN ECONOMICS

in 1995),the 1994reform the bargaining 34.8 percent worked against of the workers, power permanent changing wage-setting process, giving moreimportance to the variable of earnings, andallowing component the opting-out clauses(allowing thatlower-level collectivebargaining lower than could pass wagegrowth upper-level agreements) agreements andSerrano, 2001b).In thissense,theestimates (Ferreiro signof labor reform is theexpected one. market is statistically The rateof coverageof collectivebargaining signifiAn in is increase the rate of coverage leadsto its cant,but sign negative. we cannot thatcollecconclude a fall in realwagespassed.Therefore, in Spainworks to reach excessivewage tivebargaining as a mechanism of totalsalaried Thehighrateof coverage (75 percent employgrowths. inmeansthatworkers ment,higherif we excludepublicemployment) ternalizethe negativeconsequencesof wage growth,mainlyif we of the wage growthandthe coordination, considerthe low dispersion in Spain. formal andinformal, of collectivebargaining agreements In any case, considering the valuesof the standardized coefficients, in column of theexplanatory included theorder of importance variables 1994 market is salaried labor 8 (Table6) the following: employment, cov1984labormarket incomes reform, reform, policies,GDPgrowth, market 1997 1984 labor of and collective and, erage bargaining, finally, of thecoverage reforms. Theminor of collective importance bargaining than is clearif we consider that,otherthingsbeingequal,a fall greater is neededin thecoverage of collective 15.3percent (moving bargaining froma rateof 75.1 percent to generate to 63.6 percent) negativereal Inthecaseof thecollective thedifstructure, bargaining wagesgrowth. coefficients arenotstatistically it canferent and,therefore, significant, not be concluded thatthe degreeof centralization anddecentralization of collectivebargaining is a determinant of thewagetrend in Spain. Table7 showsthefunctions in thecaseof inflation. estimated Among theexplanatory we haveincluded real variables, representing "wages," in collective all column 9, of wage growthpassed bargaining. Except the estimatesare not statistically and even in the case of significant, column9, its significance mustbe takenwithcaveats. Thisoutcome is notsurprising if we consider thattheoriginof Spanish inflation mustbe foundin the markups of the servicesectorclosedto the domesticand of company foreigncompetition. Onlytherateof coverage agreements is statistically to witha positive but, significant, contrary expectations, to a moredecentralized collectivebargaining strucsign:a movement turewouldcreatemoreinflation whilean increase in the weightof the national wouldreducetherateof inflation. In this industry agreements

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Table 7 Inflation-dependent

variable: rate of growth of rate of inflation (1) (2) -12.617 (0.968) 3.054 (0.822) -8.024 (0.502) (3) -15.431 (0.421) 2.340 (0.539) -5.043 (0.229) 2.617 (0.077) -0.026 (0.001) 8.938 (0.403) (4)

Constant GDP Incomes policy LMR84 LMR94 LMR97 Employment Unemployment Wages Coverage COVCNI COVC COVNI COVPI Adjusted R2 Standard error F-statistic Durbin-Watson

-14.430 (1.180) 3.213 (0.890)

-6.41 (0.18

-6.22 (0.29 -2.48 (0.07 -2.77 (0.15 3.57 (0.15 2.16 (0.98

-0.012 24.574 0.791 1.381

-0.062 25.169 0.503 1.456

-0.298 27.821 0.220 1.507

-0.230 27.09 0.36 1.49

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Table 7 (Continued) (7) Constant GDP Incomes policy LMR84 LMR94 LMR97 Employment Unemployment Wages Coverage COVCNI COVC COVNI COVPI -21.877 (0.637) -13.270 (0.615) 21.772 (0.632) -7.840 (0.426) 7.321 (0.360) (8) -29.058 (0.798) -8.007 (0.346) 25.979 (0.729) 0.578 (0.026) -1.164 (0.049) (9) -54.228** (1.907) -30.818*** (1.758) 68.538** (2.241) -16.951 (1.172) 14.812** (0.938)

(10)

-41.93 (1.16

-5.84 (0.27 38.61 (1.09 7.05 (0.34 -7.98 (0.35

-2.134*** (1.380)

-2.376*** (1.474) -1.117 (0.732)

-1.794*** (1.504) 4.638* (3.056)

-2.60 (1.70

-1.40 (1.38

-0.06 -0.147 0.323 -0.193 Adjusted R2 Standard error 25.21 26.157 20.092 26.678 F-statistic 0.82 0.564 2.353 0.541 Durbin-Watson 2.23 1.668 1.928 2.036 * significant t-values arein parentheses; at the5 p Notes:Absolute atthe 1 percent level;** significant

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COLLECTIVE DECENTRALIZED VERSUS CENTRALIZED BARGAINING 723

sense, the corporatistview accordingto which a centralizedcollective bargaininggeneratesbetteroutcomes would be reinforced. Tables8 and 9 test the consequencesof collective bargainingin terms of creation of salaried employment and rate of unemployment.Most empiricalstudies only test the consequence of collective bargainingon the rateof unemployment. However,we believe thatthis analysiswould be wrong, since in Spain unemploymentis not only explained by the into the evolution of employmentbut also by the massive incorporation labor marketduring the 1980s of the female population.Besides, the highjob loss in the early 1980s was partiallyoffset by the intenseuse of the employmentloss not only meant the earlyretirements, and,therefore, an increase in unemploymentfigures but also a departureof affected workersfromthe labormarketto the retirement (nonactive)population. The estimationsfor salariedemploymentare betterthanthose for the rateof unemployment.For salariedemployment,all the equationsestimated are statisticallysignificant.In both cases, we have not included among the explanatoryvariablesthe implementationof incomes policies, since in all equationsthe coefficients estimated were not significant. Comparedto the rate of inflation and wage growth, the incomes polices were a useful tool to reduce inflationrates and moderatewage growth and increase corporateprofits, but not to create employment. The oppositeeffects can help to explainthe refusalto use incomes policies since the mid-1980s, when the strategyof the economic policy gave to the reductionof the ratesof unemployment moreimportance (Ferreiro and Serrano,2001a). GDP growth,coverage of collective bargaining,and labor marketreforms are statisticallysignificantdeterminants of the evolution of salaried employment. GDP growth and the 1984 labor market reform contributepositively to the creationof employment.Accordingto column4 (Table9), ceterisparibus, salariedemploymentincreases currently with a rate of growth of GDP higherthan0.2 percent.The coverage of collective bargaining a negative, even small, effect has, on the contrary, on the employmentcreation.Accordingto column 2 (Table9), thatis, if we do not considerthe consequencesof the labormarketreforms,a fall higherthan22.3 percentin the rateof coverage of collective bargaining (which would mean to move fromthe 75.1 percentregisteredin 2000 to a rateof 58.3 percent)is needed to createemployment. coefficients in column 4 (Table9), the Accordingto the standardized variables of employmentcreationare GDP most important explanatory of of rate collective the coverage bargaining,the 1984 reform, growth, the 1997 and reforms. 1994 the resultsof columns and,finally, Comparing

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Table 8 Rate of unemployment-dependent (1) Constant GDP Coverage LMR84 LMR94 LMR97 COVCNI COVPI COVC COVNI 15.855* (5.538) -5.385* (6.371)

variable: rate of growth of rate of unemployment (2) 14.945* (5.070) -5.075* (5.761) 0.314 (1.136) (3) 19.999* (4.223) -4.792* (6.865) -3.190 (0.677) -5.554** (1.878) -3.334 (0.934) (4) 22.302* (4.434) -4.479* (6.107) 0.322 (1.208) -7.049 (1.253) -4.638*** (1.544) -3.031 (0.862) (5) 22.377* (4.202) -4.497* (5.669) 0.327 (1.152) -7.037 (1.197) -4.790 (1.327) -2.839 (0.658) 0.021 (0.085)

0.700 0.705 0.818 0.824 0.808 Adjusted FR Standard error 5.751 5.699 4.474 4.397 4.591 40.584* F-statistic 21.307* 20.115* 16.953* 12.960* Durbin-Watson 0.772 0.757 1.809 1.657 1.658 * significant t-values arein parentheses; Notes:Absolute at the 1 percent at the5 percent level;** significant l

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Table 9 Salaried employment-dependent (1) Constant GDP Coverage LMR84 LMR94 LMR97 COVCNI COVPI COVC COVNI -3.290* (3.314) 1.915* (6.534)

variable: rate of growth of salaried employment (2) -2.911* (2.904) 1.786* (5.962) -0.131*** (1.393) (3) -4.978* (2.908) 1.693* (6.707) 1.544 (0.906) 1.391 (1.301) 1.585 (1.229) (4) -6.195* (3.670) 1.528* (6.205) -0.170** (1.902) 3.583** (1.897) 0.907 (0.899) 1.425 (1.208) (5) -6.486* (3.795) 1.595* (6.268) -0.188** (2.065) 3.535** (1.874) 1.493 (1.289) 0.683 (0.494) -0.084 (1.022)

0.842 0.841 0.809 0.71 0.726 Adjusted Rf 1.473 1.476 1.617 1.994 1.938 Standarderror 16.083* 19.020* 19.039* 42.693* 23.571 * F-statistic 2.170 2.230 2.306 1.004 1.047 Durbin-Watson * significant at the5 percen atthe 1 percent t-values arein parentheses; level;** significant Notes:Absolute

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ECONOMICS OF POSTKEYNESIAN 726 JOURNAL

thatthe flexibilityof the labor 2 and4 (Table9), it can be concluded boom of temporary 1984 and the afterthe reform market subsequent to the creation of employment has raisedthe sensitivity employment is found in the This to be of collective reason wage bargaining. coverage workers andtemporary (in 1995,a temporary gapbetweenpermanent as seen in 44.8 percent of a permanent worker earned one). Although, the reduces of collective in thecoverage Table1, anincrease bargaining the is assume we in collective (which bargaining wagegrowthpassed workin theincrease temporary for permanent workers), wagegrowth Permanent of theseworkers. reduced theearnings ers hasdramatically them more have risen in relative would workers' terms, making wages of and to the creation employment. affecting costly, of of thedegreeof (de)centralization Withregard to theconsequences are coefficients for all the variables thenegative collectivebargaining, This wouldmeanthatit is the coverageof collective not significant. of fortheevolution thatis determinant butnotits structure, bargaining, it is ecofor and Both employment unemployment, (un)employment. structureof collective nomically significantthat the intermediate has collective theprovincial bargaining agreements, industry bargaining, we of allthesekindsof variables. thegreatest Although impact negative and centralized aboutwhether cannotpose any conclusivestatement collectivebargaining decentralized are,in termsof macroagreements similar ornot,bothseemto havea negative economic outcomes, impact on employment. Conclusions thatcollective Thisstudyallowsoneto conclude procedures bargaining formacroeconomic considered in Spaincannot be seriously responsible As we haveseen,the in terms of inflation andunemployment. outcomes on inflation is statistically influence of collectivebargaining significant if we takeintoaccount anobviousconclusion the andlow butnegative, to collectivebargaining on wage low influence of the variables related andthefactthat,during theperiodunder theacconsideration, growth in increase real terms cumulated came to 0.79 agreedwage hardly perinthecaseof theevolution cent.Theinfluence is greater of employment therateof coverage of collectivebargaining andunemployment: has a on employment butsmall,negative creation andthe impact significant, rateof unemployment. Thestructure of collective however, is, in allthecases,not bargaining, We cannotconcludewhether a centralized collectivebarsignificant.

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DECENTRALIZED VERSUS CENTRALIZED BARGAINING COLLECTIVE 727

in macroeconomic is moreefficient, thana decentralized terms, gaining or vice versa,or whether bothareequivalent. Inanycase,theseconclusions theresults of pay onlytakeintoaccount increases the collective Actuthrough Spanish procedures. bargaining the economic effects of the should into take ally, wage-setting process the rates but also drift. account not only collectivelyagreedpay wage andmacroeconomic effectsof collective Besides,themicrobargaining in results but also arenotonlyinfluenced by wagegrowth by therestof inof thecollectivebargaining and thecontents agreements by another All theseaspects, of labormarket. are stitutional elements nevertheless, outsidethescopeof thispaper.
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