Bargaining Structure and Intra-Establishment Pay Inequality in four European Countries: Evidence from Matched Employer-Employee Data

This paper investigates the patterns of within establishment wage inequality in four European countries (Belgium, Ireland, Italy and Spain). Using matched employeremployee data (ESES) we analyse the effects of work organization practices, pay policies, bargaining procedures and industrial relations arrangements on the pattern of wage differentials in the firm. The main findings suggest that both employees characteristics, firm size and work organisation practices are important determinants of within establishments wage dispersion. Decentralised bargaining is shown to be associated to higher (unconditional) intra-firm wage dispersion; however, when a large set of controls for of employee and employer characteristics are included the association turns negative or non (statistically) significant. Finally, when we account for the endogeneity of the bargaining structure, we detect no causal effect of decentralised bargaining on within establishments inequality. JEL Classification: J 31, J 51, M 50