Abstract:

A large literature documents a "firm wage effect," whereby different firms pay a wage premium to observationally similar workers. This paper studies how sectoral collective bargaining determines these firm wage effects. Using matched employer-employee administrative data from Argentina, we link workers and firms to the collective bargaining unit (CBU) that governs their employment contracts. To estimate the causal effect of CBUs on firm pay, we exploit the fact that some firms change CBUs over time, typically due to representation disputes between unions. We find that CBU affiliation causally explains between 13 and 19 percent of the variation in firm pay. We extend the canonical Abowd-Kramarz-Margolis (AKM) model to allow for firm-by-CBU wage effects, and show that accounting for CBUs increases the share of log wage variance explained by the workplace by about 20 percent. Together, these results imply that CBUs account for roughly 7 percent of overall earnings dispersion. Our findings highlight a novel channel through which collective bargaining shapes earnings inequality: by amplifying heterogeneity across firms rather than merely compressing wages within them.