The Bargaining System and Performance

Abstract

Theoretical reasoning disagrees about what type of bargaining system performs best. The authors have tested the explanatory power of three competing hypotheses: neoliberalism, corporatism, and the hump-shape hypothesis. All of these hypotheses lack empirical support due to two main shortcomings. First, they ignore that wage restraint raises three distinct types of collective-action problems. Second, they do not consider qualitative differences among the national bargaining systems (particularly the role of the state) that do not allow analysis to construct such ordinal rankings of bargaining coordination as adopted by all previous empirical studies. Proceeding from a revised hypothesis and new measures of national bargaining systems, the authors have found a nonlinear relationship between the bargaining system and economic performance in a way that economy-wide wage coordination is superior only when the bargaining system is able to make local bargaining comply with coordination activities.