Relevance Today

European governments often debate reform of collective bargaining institutions to achieve higher flexibility for firms while preserving fair and equal working conditions. Our study shows that firms’ exits from centralized collective bargaining, while leading to wage losses, can benefit workers by improving labor market attachment; however, these positive effects for workers are not present in labor markets where firms have high wage-setting power.

European governments often debate reform of collective bargaining institutions to achieve higher flexibility for firms while preserving fair and equal working conditions. Our study shows that firms’ exits from centralized collective bargaining, while leading to wage losses, can benefit workers by improving labor market attachment; however, these positive effects for workers are not present in labor markets where firms have high wage-setting power.

European governments often debate reform of collective bargaining institutions to achieve higher flexibility for firms while preserving fair and equal working conditions. Our study shows that firms’ exits from centralized collective bargaining, while leading to wage losses, can benefit workers by improving labor market attachment; however, these positive effects for workers are not present in labor markets where firms have high wage-setting power.