The Regional Dimension of Collective Wage Bargaining: The Case of Belgium

Regional Studies. The potential failure of national industry agreements to take into account productivity levels in the least productive regions has been considered as one of the causes of regional unemployment in European countries. This paper investigates the role of the collective bargaining structure in the relationship between regional wage and productivity differentials. Using a rich Belgian-linked employer-employee dataset, it is found that the more an industry is decentralized in terms of wage setting, the more regional differences in productivity are reflected in wages. It is concluded that the current Belgian wage-setting system already includes mechanisms that allow regional productivity to be taken into account.