Collective Wage Contracts, Opt-Out Clauses, and Firm Wage Differentials: Evidence from Linked Employer-Employee Data

Using a large linked employeremployee data set, this article studies whether the existence and use of flexibility provisions within centralized collective wage agreements alter the structure of pay across employers. Using level regressions and first-difference methods, we find thatcompared with contracts without any flexibilitywages under opt-out clauses are more responsive to local profitability conditions in below-average-performing establishments. In contrast, the sensitivity of wages to local profitability is smaller in high-performance establishments. Our results provide further evidence for a threat potential of the existence of opt-out clauses whose impact on flexibility is larger than the real application.