IZA DP No. 11518: The One Constant: A Causal Effect of Collective Bargaining on Employment Growth?
published in: Scottish Journal of Political Economic, 2018, 65 (5), 445 - 478
A large number of articles have analysed 'the one constant' in the economic effects of trade unions, namely that collective bargaining reduces employment growth by two to four percentage points per year. Evidence is, however, mostly related to Anglo-Saxon countries. We investigate whether a different institutional setting might lead to a different outcome, making the constant a variable entity. Using linked-employer-employee data for Germany, we find a negative correlation between being covered by a sector-wide bargaining agreement or firm-level contract and employment growth of about one percentage point per annum. However, the correlation between employment growth and collective bargaining is not robust to the use of panel methods. We conclude that the results of the literature using cross-section data might be driven by selection.