Does Centralized Collective Bargaining Promote Wage Restraint? The Case of Israel

Abstract

This study examines whether centralized collective bargaining promoted wage restraint in Israel in the period 1968–84. Wage determination in Israel appears to be highly centralized, and the author shows that wage increases under central settlements during the period studied were almost invariably consistent with the goal of preserving competitiveness. Except in periods when there was consensus among major interest groups that sacrifice was necessary, however, wage drift tended to render the central federation's exercise of restraint ineffective. These results, the author concludes, support the view that consensus, and not the structure of collective bargaining per se, is the key to success in “corporatist” economies.