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Grupo de Estudos Monetários e Financeiros

Estudos do GEMF, N.º 18 de 2015


Pacts for Employment and Competitiveness as a Role Model?

Their Effects on Firm Performance

John T. Addison
University of South Carolina, Durham University, University of Coimbra/GEMF and IZA Bonn

Paulino Teixeira
Universidade de Coimbra/GEMF and IZA Bonn

Katalin Evers
Institute for Employment Research (IAB)

Lutz Bellmann
Friedrich-Alexander-Universität Erlangen-Nürnberg, IAB and IZA Bonn

Pacts for employment and competitiveness are an integral component of the ongoing process of decentralization of collective bargaining in Germany, a phenomenon that has been hailed as key to that nation's economic resurgence. Yet little is known about the effects of pacts on firm performance. The evidence largely pertains to employment and is decidedly mixed. The present paper investigates the association between pacts and a wider set of outcomes – wages, employment, investment, productivity, innovation, and survivability – in a RDD framework where the controls comprise establishments that negotiated over pacts but failed to reach agreement on their implementation. An extensive set of simulations are run to test for robustness of the key findings of the model. There is no evidence of pacts negatively impacting any of the selected measures of establishment performance. Indeed, the positive effects reported for wages, productivity, and innovation are sustained in simulations.

JEL Classification: D22, J3, J41, J50, J53.

Keywords: pacts for employment and competitiveness, concession bargaining, opening clauses decentralization, firm performance, regression discontinuity design, Germany

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