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  • Does the wage structure depend on the wage contract? A study of public sector wage contracts in Iceland
  • It is widely accepted within the field of labor economics that centralization of
    collective bargaining leads to lower wage dispersion. But is it possible to change the
    wage structure through changes in the collective bargaining agreement and
    decentralization of the bargaining process? A unique opportunity to explore this
    question presented itself when changes were made to collective bargaining contracts in
    the public sector in Iceland.
    In the first chapter I look at the Icelandic labor market. The Icelandic labor force is
    often described as being flexible. But is it really? Using definitions of labor-market
    flexibility, I explore whether the Icelandic labor market can be classified as such and
    find that on most measures of flexibility the Icelandic labor market can be described as
    In the second chapter I explore the effects of the changes in the bargaining structure
    and decentralization in the public sector in Iceland on the wage structure. Did wage
    dispersion increase with decentralization, as theory would predict? I find that wage
    levels rose significantly, and that the wage structure for total wages did not change but
    that the dispersion of daytime wages increased.
    In the third and final chapter I develop a model of collective bargaining as a two-stage
    process in the manner of Manning (1987). The resulting two-equation nonlinear
    structural model is then applied to the central government in Iceland in order to
    determine whether the collective bargaining structure changed along with the changes
    in the collective bargaining agreements.
    The decentralization of bargaining and the change in the collective bargaining
    agreements has changed the bargaining structure in the public sector in Iceland. I find
    that the unions have a greater bargaining power over employment than over wages,
    whereas their bargaining power over wages currently seems to be much greater for
    daytime wages than for total wages. Based on the means of the estimates of the
    bargaining power of unions over wages and employment, respectively, I can reject the
    monopoly union and right-to-manage bargaining models.

  • 28.3.2014

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