No extension without representation? Evidence from a natural experiment in collective bargaining

Alexander Hijzen; Pedro S. Martins

doi:10.2478/izajole-2020-0005

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No extension without representation? Evidence from a natural experiment in collective bargaining

IZA Journal of Labor Economics

Volume 9 (2020): Issue 1 (March 2020)

By: Alexander Hijzen and Pedro S. Martins

Open Access

|Aug 2020

Figures & Tables

Collective bargaining coverage and trade union density.
*Source*: ILO (2013).

The representativeness of collective agreements.
*Source*: Ministry of Labour (DGERT) and *Quadros de Pessoal*, authors’ calculations. Note: The vertical axis indicates the number of agreements of each level of representativeness.

Number of sectoral collective agreements and extensions, 2000–2015.
*Source*: Ministry of Labour (DGERT), authors’ calculations. *Note*: The vertical axis indicates the number of agreements in each year considered.

The probability that a collective agreement is extended.
*Source*: Ministry of Labour (DGERT), authors’ calculations. Weeks from March 1, 2011 (September 2010–June 2011).

The number of collective agreements over time.
*Source*: Ministry of Labour (DGERT), authors’ calculations.

Table 1

Balancing tests

	All		Non-affiliated		Affiliated
	(1)	(2)	(3)	(4)	(3)	(4)

Balancing variables	linear	quadratic	linear	quadratic	linear	quadratic
Representativeness, 2010	0.0815	−0.0080	0.0923	−0.0183	0.0220	0.0303
- share of workforce in afffiliated firms	(0.1143)	(0.0574)	(0.1422)	(0.0617)	(0.0695)	(0.0510)
Employment growth, 2009-2010	0.0865	0.0975	0.0953	0.1045	0.0813	0.0844
	(0.0155)	(0.0080)	(0.0195)	(0.0106)	(0.0099)	(0.0076)
	***	***	***	***	***	***
Log employment, 2010	−0.2195	−0.1584	−0.4327	−0.3626	0.5093	0.1547
	(0.6026)	(0.6073)	(0.6009)	(0.6273)	(0.7890)	(0.5082)
Log average firm size, 2010	−1.2418	−1.4115	−1.2439	−1.3098	−1.5805	−1.6135
- number of workers per firm	(0.3004)	(0.1840)	(0.2429)	(0.2017)	(0.2265)	(0.1765)
	***	***	***	***	***	***
Log average wage, 2010	−0.0510	−0.0812	−0.0530	−0.0603	−0.1147	−0.1120
- within job title and year	(0.0870)	(0.0956)	(0.0852)	(0.0875)	(0.0901)	(0.0758)
Log median wage, 2010	0.0040	−0.0092	−0.0127	−0.0059	−0.0243	−0.0035
- within job title and year	(0.0764)	(0.0828)	(0.0775)	(0.0781)	(0.0824)	(0.0605)
Export intensity, 2010	−0.4642	−0.4553	−0.4072	−0.3808	−0.5818	−0.6151
	(0.0523)	(0.0494)	(0.0579)	(0.0583)	(0.0466)	(0.0264)
	***	***	***	***	***	***
Log labour productivity, 2010	0.1753	−0.0735	0.2313	0.0320	−0.2217	−0.1636
	(0.4604)	(0.5252)	(0.4727)	(0.5360)	(0.3814)	(0.2627)

[i] Notes: The estimates reported correspond to the coefficients of the extension dummy in Eq. (1). Regressions are weighted by the number of employees in 2010. Standard errors are robust and clustered by collective agreement and signature date.

*, **, *** refer to statistical significance levels of 10%, 5%, and 1%, respectively.

The overall effects of extensions on employment growth.
*Notes*: The figure presents the estimated change in the growth rate of employment by collective agreement publication week, as measured from the threshold date of March 1, 2011 (week 0). The results are estimated from a sharp RDD using employment weights. The size of the circles is proportional to the employment of the corresponding collective agreement(s). Standard errors are robust and clustered by collective agreement and signature date. *, **, *** refer to statistical significance levels of 10%, 5%, and 1%, respectively. Authors’ calculations based on QP and DGERT data.

Table 2

The effects of extensions, all firms

Panel A. Employment growth (ΔE₂₀₁₁)
	Fuzzy		Sharp
	(1)	(2)	(1)	(2)
Treatment dummy	−0.0953	−0.0500	−0.0578	−0.0420
	(0.0446)	(0.0591)	(0.0262)	(0.0262)
	**		**
Constant	−0.1042	−0.1358	−0.1226	−0.1293
	(0.0388)	(0.0274)	(0.0313)	(0.0236)
	**	***	***	***
Relative time effects	Linear	Quadratic	Linear	Quadratic
Observations	62	62	62	62
R-squared	0.3976	0.4037	0.4290	0.4359

Panel B. Employment growth (ΔE₂₀₁₁- ΔE₂₀₁₀)
	Fuzzy		Sharp
	(1)	(2)	(1)	(2)
Treatment dummy	−0.1574	−0.1472	−0.1022	−0.1035
	(0.0548)	(0.0709)	(0.0301)	(0.0295)
	***	**	***	***
Constant	−0.1950	−0.1985	−0.2238	−0.1926
	(0.0380)	(0.0360)	(0.0279)	(0.0247)
	***	***	***	***
Relative time effects	Linear	Quadratic	Linear	Quadratic
Observations	62	62	62	62
R-squared	0.6579	0.6581	0.6809	0.6958

[i] Notes: Regressions are weighted by the number of employees in 2010. They include controls for log average firm size, export intensity, and affiliation status. Standard errors are robust and clustered by collective agreement and signature date.

*, **, *** refer to statistical significance levels of 10%, 5%, and 1%, respectively.

Authors’ calculations based on QP and DGERT data.

Change in employment growth, percentage points, (DE₂₀₁₁- DE₂₀₁₀), sharp RDD

Table 3

Sensitivity analysis, all firms

Panel A. Fuzzy RDD1

	Employment growth				Change in employment growth
	Baseline	Controls	Bandwidth	Falsification	Baseline	Controls	Bandwidth	Falsification
Treatment dummy	-0.0953	-0.0511	-0.0976		-0.1574	-0.1217	-0.1540
	(0.0446)	(0.0163)	(0.0566)		(0.0548)	(0.0189)	(0.0523)
	**	***	*		***	***	***
Constant	-0.1042	-0.0963	-0.1078		-0.1950	-0.1350	-0.1701
	(0.0388)	(0.0053)	(0.0523)	non-available	(0.0380)	(0.0123)	(0.0327)	non-available
	**	***	**		***	***	***
Relative time effects	Linear	Linear	Linear		Linear	Linear	Linear
Observations	62	62	76		62	62	76
R-squared	0.3976	0.3472	0.4975		0.6579	0.5452	0.6898

Panel B. Sharp RDD1

	Employment growth				Change in employment growth
	Baseline	Controls	Bandwidth	Falsification	Baseline	Controls	Bandwidth	Falsification
Treatment dummy	-0.0578	-0.0603	-0.0164	0.0364	-0.1022	-0.1169	-0.0898	-0.0345
	(0.0262)	(0.0203)	(0.0264)	(0.0609)	(0.0301)	(0.0245)	(0.0210)	(0.0556)
	**	***			***	***	***
Constant	-0.1226	-0.0891	-0.1570	-0.0699	-0.2238	-0.1352	-0.2017	-0.2129
	(0.0313)	(0.0115)	(0.0412)	(0.0649)	(0.0279)	(0.0143)	(0.0259)	(0.0541)
	***	***	***		***	***	***	***
Relative time effects	Linear	Linear	Linear	Linear	Linear	Linear	Linear	Linear
Observations	58	58	72	46	58	58	72	46
R-squared	0.4290	0.3917	0.5210	0.5057	0.6809	0.5650	0.7015	0.5902

Panel C. Occupation level analysis (employment growth)2
	Fuzzy RDD, Employment growth				Sharp RDD, Employment growth
	Baseline	Controls	Bandwidth	Falsification	Baseline	Controls	Bandwidth	Falsification
Treatment dummy	-0.1282	-0.0543	-0.1292		-0.0558	-0.0606	-0.0462	-0.0197
	(0.0597)	(0.0209)	(0.0454)		(0.0282)	(0.0304)	(0.0213)	(0.0404)
	**	***	***		**	**	**
Constant	1.5142	-0.0956	-0.2796		1.4891	-0.0897	-0.2920	-0.6206
	(1.8044)	(0.0150)	(0.3563)	non-available	(1.8096)	(0.0265)	(0.3562)	(0.0827)
		***				***		***
Relative time effects	Linear	Linear	Linear		Linear	Linear	Linear	Linear
Observations	3,320	3,320	4,257		3,048	3,048	3,985	2,451
R-squared	0.0774	0.0205	0.1527		0.0821	0.0243	0.1646	0.1626

[i] Regressions are weighted by the number of employees in 2010 and include controls for log average firm size, export intensity, and affiliation status unless stated

otherwise.

*, **, *** refer to statistical significance levels of 10%, 5%, and 1%, respectively.

“Controls”: affiliation status only; “bandwidth”: October 2010-August 2011; “Falsification”: placebo reform date (mid-May 2011) using agreements in post-reform period only (March 2011-August 2011).

1Standard errors are robust and clustered by collective agreement and signature date.

2Standard errors are robust and clustered by collective agreement, occupation and signature date.

Authors’ calculations based on QP and DGERT data.

The effects of extensions by affiliation status.
*Notes*: “Membership status: 0” refers to nonaffiliated firms; “Membership status: 1” refers to affiliated firms. The figure presents the estimated change in the growth rate of employment by collective agreement publication week, as measured from the threshold date of March 1, 2011 (week 0). The results are estimated from a sharp RDD using employment weights. The size of the circles is proportional to the employment of the corresponding collective agreement(s). Standard errors are robust and clustered by collective agreement and signature date. *, **, *** refer to statistical significance levels of 10%, 5%, and 1%, respectively.

Table 4

Results by affiliation status

Panel A. Employment growth (ΔE₂₀₁₁)¹
	Fuzzy RDD				Sharp RDD
	Baseline	Controls	Bandwidth	Falsification	Baseline	Controls	Bandwidth	Falsification
Non-affiliated firms	-0.1121	-0.1395	-0.1114		-0.0536	-0.0515	-0.0071	0.0684
	(0.0470)	(0.0574)	(0.0592)		(0.0329)	(0.0248)	(0.0311)	(0.1080)
	**	**	*				**
Affiliated firms	0.179	0.1172	0.0087		-0.0980	-0.0982	-0.061	-0.0280
	(0.0712)	(0.0876)	(0.0962)		(0.0204)	(0.0326)	-0.0292	(0.0336)
	**				***	***	**
Constant	-0.0544	-0.0587	-0.0527	non-available	-0.0786	-0.0975	-0.0722	-0.0978
	(0.0180)	(0.0275)	(0.0300)		(0.0156)	(0.0187)	-0.0269	(0.1082)
	**	**	*		***	***	**
Relative time effects	linear	linear	linear		linear	linear	linear	linear
Observations	62	62	76		58	58	72	46
R-squared	0.4157	0.3802	0.5026		0.4579	0.414	0.5432	0.5393

Panel B. Change in employment growth (ΔE₂₀₁₁- ΔE₂₀₁₀)¹
	Fuzzy RDD				Sharp RDD
	Baseline	Controls	Bandwidth	Falsification	Baseline	Controls	Bandwidth	Falsification
Non-affiliated firms	-0.1787	-0.2446	-0.1706		-0.1222	-0.1309	-0.0986	-0.0337
	(0.0653)	(0.1118)	(0.0650)		(0.0428)	(0.0306)	(0.0309)	(0.0928)
	**	**	**		***	***	***
Affiliated firms	0.2565	0.1080	0.1798	non-available	-0.0512	-0.0636	-0.0681	-0.0216
	(0.0916)	(0.1877)	(0.0887)		(0.0159)	(0.0317)	(0.0272)	(0.0255)
	***		*		***	*	**
Constant	-0.0710	-0.0814	-0.0888		-0.0865	-0.1283	-0.1113	-0.1247
	(0.0163)	(0.0481)	(0.0210)		(0.0164)	(0.0181)	(0.0212)	(0.0870)
	***		***		***	***	***
Relative time effects	linear	linear	linear		linear	linear	linear	linear
Observations	62	62	76		58	58	72	46
R-squared	0.6650	0.5670	0.6919		0.6990	0.5762	0.7091	0.5963

Panel C. Occupation level analysis (employment growth)²
	Fuzzy RDD, Employment growth				Sharp RDD, Employment growth
	Baseline	Controls	Bandwidth	Falsification	Baseline	Controls	Bandwidth	Falsification
Non-affiliated firms	-0.1736	-0.1388	-0.1716		-0.0470	-0.0524	-0.0379	-0.0007
	(0.0802)	(0.0607)	(0.0594)		(0.0295)	(0.0290)	(0.0214)	(0.0494)
	**	**	***			*	*
Affiliated firms	0.1927	0.1232	0.0834		-0.0934	-0.0966	-0.0904	-0.0595
	(0.1271)	(0.1010)	(0.0848)		(0.0522)	(0.0583)	(0.0360)	(0.0489)
					*	*	**
Constant	1.4994	-0.0597	-0.2883	non-available	1.4808	-0.0978	-0.3074	-0.6435
	(1.8100)	(0.0331)	(0.3566)		(1.8108)	(0.0254)	(0.3565)	(0.0887)
		*				***		***
Relative time effects	linear	linear	linear		linear	linear	linear	linear
Observations	3,320	3,320	4,257		3,048	3,048	3,985	2,451
R-squared	0.0779	0.0235	0.1534		0.0830	0.0256	0.1666	0.1652

[i] Regressions are weighted by the number of employees in 2010 and include controls for log average firm size and export intensity unless stated otherwise. *, **, *** refer to statistical significance levels of 10%, 5%, and 1%, respectively.

¹Standard errors are robust and clustered by collective agreement and signature date.

²Standard errors are robust and clustered by collective agreement, occupation and signature date.

Authors’ calculations based on QP and DGERT data.

Change in employment growth, percentage points, (AE2011-AE2010)

Table 5

Panel A. Results on the role of representativeness by affiliation status
	Fuzzy		Sharp
	(1)	(2)	(1)	(2)
	ΔE	ΔΔE	ΔE	ΔΔE
Treatment effect *	−0.1278	−0.1757	−0.0822	−0.0974
non-affiliated firms	(0.0424)	(0.0621)	(0.0354)	(0.0386)
	***	***	**	**
Treatment effect *	0.3415	0.3383	−0.0780	−0.0531
affiliated firms	(0.1412)	(0.1542)	(0.0427)	(0.0454)
	**	**	*
Representativeness *	−0.2729	−0.1284	−0.3197	−0.0297
non-affiliated firms	(0.1469)	(0.1888)	(0.1690)	(0.1893)

Representativeness *	* 0.1770	0.0388	* 0.0805	−0.0691
affiliated firms	(0.0797)	(0.1047)	(0.0594)	(0.0769)
	**
Treatment dummy *	0.3024	0.1296	0.2443	−0.1178
non-affiliated firms *	(0.1603)	(0.2129)	(0.1706)	(0.2044)
representativeness	*
Treatment dummy *	−0.5177	−0.2431	−0.1288	−0.0233
affiliated firms *	(0.2553)	(0.2887)	(0.1087)	(0.0989)
representativeness	*
Affiliated firms	−0.2098	−0.2005	0.0079	−0.0016
	(0.0866)	(0.0741)	(0.0428)	(0.0406)
	**	**
Constant	−0.0025	−0.0467	−0.0265	−0.0740
	(0.0390)	(0.0341)	(0.0332)	(0.0304)
				**
Relative time effects	linear	linear	linear	linear
Observations	62	62	58	58
R-squared	0.5042	0.6747	0.5587	0.7248

Panel B. Results on the role of retroactivity by affiliation status
	Fuzzy		Sharp
	(1)	(2)	(1)	(2)
	ΔE	ΔΔE	ΔE	ΔΔE
Treatment effect *	−0.1026	−0.1688	−0.0459	−0.1100
non-affiliated firms	(0.0406)	(0.0510)	(0.0300)	(0.0344)
	**	***		***
Treatment effect *	0.1708	0.2452	−0.0919	−0.0498
affiliated firms	(0.0692)	(0.0817)	(0.0237)	(0.0200)
	**	***	***	**
Treatment effect *	−0.0003	−0.0006	−0.0003	−0.0005
non-affiliated firms *	(0.0001)	(0.0002)	(0.0002)	(0.0003)
administrative delay	**	***		*
Treatment effect *	−0.0001	0.0003	−0.0001	0.0001
affiliated firms *	(0.0002)	(0.0003)	(0.0002)	(0.0002)
administrative delay
Affiliated firms	−0.0926	−0.1715	0.0763	−0.0111
	(0.0543)	(0.0493)	(0.0270)	(0.0282)
	*	***	***
Constant	−0.0549	−0.0682	−0.0785	−0.0859
	(0.0191)	(0.0176)	(0.0161)	(0.0169)
	***	***	***	***
Relative time effects	linear	linear	linear	linear
Observations	62	62	58	58
R-squared	0.4425	0.7089	0.4730	0.7176

[i] Panel A: Regressions are weighted by the number of employees in 2010. Standard errors are robust and clustered by collective agreement and signature date.

*, **, *** refer to statistical significance levels of 10%, 5%, and 1%, respectively.

“Representativeness” is measured by the share of the workforce in affiliated firms in the total employment of the relevant sector.

Panel B: Regressions are weighted by the number of employees in 2010. Standard errors are robust and clustered by collective agreement.

*, **, *** refer to statistical significance levels of 10%, 5%, and 1%, respectively.

“Administrative delay” is defined in terms of the number of days since the entry-into-force date of the collective agreement among affiliated firms and the publication date of the extension to nonaffiliated firms.

Table 6

Results on inequality

Panel A. Fuzzy RDD
	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)
	Δp5	Δ(p50-p5)	Δp10	Δ(p50-p10)	Δp15	Δ(p50-p15)	Δp20	Δ(p50-p20)
Treatment effect	0.0805	-0.0865	0.0695	-0.0755	0.0710	-0.0770	0.0289	-0.0349
	(0.0373)	(0.0481)	(0.0400)	(0.0532)	(0.0566)	(0.0721)	(0.0285)	(0.0453)
	**	**	*
Constant	-0.0286	0.0501	-0.0082	0.0296	-0.0248	0.0463	-0.0109	0.0324
	(0.0221)	(0.0296)	(0.0205)	(0.0297)	(0.0327)	(0.0419)	(0.0165)	(0.0259)
Relative time effects	Linear	Linear	Linear	Linear	Linear	Linear	Linear	Linear
Observations	62	62	62	62	62	62	62	62
R-squared	0.0875	0.1217	0.2290	0.2353	0.1727	0.1858	0.0644	0.1265

Panel B. Sharp RDD
	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)
	Δp5	Δ(p50-p5)	Δp10	Δ(p50-p10)	Δp15	Δ(p50-p15)	Δp20	Δ(p50-p20)
Treatment effect	0.0493	-0.0476	0.0494	-0.0477	0.0519	-0.0502	0.0184	-0.0166
	(0.0232)	(0.0294)	(0.0213)	(0.0306)	(0.0296)	(0.0392)	(0.0147)	(0.0242)
	**		**		*
Constant	-0.0310	0.0522	-0.0087	0.0300	-0.0266	0.0478	-0.0109	0.0321
	(0.0213)	(0.0282)	(0.0185)	(0.0275)	(0.0298)	(0.0389)	(0.0155)	(0.0247)
		*
Relative time effects	Linear	Linear	Linear	Linear	Linear	Linear	Linear	Linear
Observations	58	58	58	58	58	58	58	58
R-squared	0.1019	0.1442	0.2675	0.251	0.217	0.212	0.0756	0.1275

[i] Results based on residuals from individual-level log base wage regression on job category dummies, collapsed by firm type (affiliated vs nonaffiliated), collective agreement, and year. Dp5 denotes the change in the 5th percentile (of the cell’s log base wage residual) between 2011 and 2010, D(p50−p5) denotes the difference between the median and the 5th percentile in 2011, and similarly for the remaining dependent variables.

Table A1

Collective agreements and extensions

Agreement sector	Date agreement	Date extension
Metallurgic industry	9/8/2010	12/22/2010
Agriculture, fishing and forestry	9/22/2010	1/10/2011
Car sale	10/8/2010	1/10/2011
Viana do Castelo retail	10/8/2010	12/29/2010
Clinical analysis labs	11/8/2010	2/28/2011
Wine trade sector	11/22/2010	2/28/2011
Football clubs (players)	12/15/2010	3/22/2011
Cork industry, North, Office workers	12/29/2010	4/26/2011
Wine industry, cellars	1/10/2011	4/26/2011
Textile industry	1/24/2011
Hotels and restaurants, Centre and South	1/24/2011	5/23/2011
Aveiro retail	2/22/2011	5/23/2011
Ropes industry	2/28/2011
Chemical and pharmaceutical retail	2/28/2011	5/30/2011
Wood	3/9/2011
Pharmaceutical products retail	3/29/2011
Merchandising firms	3/29/2011
Viseu retail	4/8/2011
Wheat	4/8/2011
Coffee	4/8/2011
Driving schools	4/8/2011
Fish preserve industry	4/26/2011
Bread manufacturing, Lisbon	4/26/2011
Guarda, retail	4/29/2011
Poultry, slaughter	5/9/2011
Farming	5/9/2011
Meat, retail, South	5/16/2011
Retail storehouses	5/23/2011
Bread manufacturing	5/23/2011
Fishing	5/30/2011
Non-alcoholic beverages	5/30/2011
Cement	6/8/2011
Shoe manufacturing	7/15/2011
Farming, Abrantes	7/15/2011
Farming, Beja	7/22/2011
Construction sector	8/8/2011
Private schools	8/16/2011
Clothing	8/16/2011
Textile industry	8/16/2011